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Risk Factor Evolution for Counterparty Credit Risk under a Hidden Markov Model [PDF]
Risks, 2019 One of the key components of counterparty credit risk (CCR) measurement is generating scenarios for the evolution of the underlying risk factors, such as interest and exchange rates, equity and commodity prices, and credit spreads.
Ioannis Anagnostou, Drona Kandhai
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A Gentle Introduction to Default Risk and Counterparty Credit Modelling [PDF]
, 2016 In this paper we introduce the reader to the basic tools for the computation of Counterparty Credit Risk such as Credit Value Adjustment and Debt Value Adjustment. We also present the effect of mitigating clauses, like netting and collateral, in reducing
Laura Ballotta +2 more
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Neural network expression rates and applications of the deep parametric PDE method in counterparty credit risk [PDF]
Annals of Operations Research, 2023 The recently introduced deep parametric PDE method combines the efficiency of deep learning for high-dimensional problems with the reliability of classical PDE models. The accuracy of the deep parametric PDE method is determined by the best-approximation
Kathrin Glau, Linus Wunderlich
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Double-Layer Network Model of Bank-Enterprise Counterparty Credit Risk Contagion
Complexity, 2020 Banks and enterprises constitute a multilayered, multiattribute, multicriteria credit-related super network due to financial transaction behaviors, such as credit, wealth management, savings, and derivatives.
Tingqiang Chen +3 more
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Boundary-safe PINNs extension: Application to non-linear parabolic PDEs in counterparty credit risk [PDF]
Journal of Computational and Applied Mathematics, 2022 The goal of this work is to develop deep learning numerical methods for solving option XVA pricing problems given by non-linear PDE models. A novel strategy for the treatment of the boundary conditions is proposed, which allows to get rid of the ...
Joel P. Villarino +2 more
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Distributionally Robust XVA via Wasserstein Distance: Wrong Way Counterparty Credit and Funding Risk [PDF]
Applied Economics and Finance, 2020 This paper investigates calculations of robust X-Value adjustment (XVA), in particular, credit valuation adjustment (CVA) and funding valuation adjustment (FVA), for over-the-counter derivatives under distributional ambiguity using Wasserstein distance ...
Derek Singh, Shuzhong Zhang
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Efficient Computation of Exposure Profiles for Counterparty Credit Risk [PDF]
SSRN Electronic Journal, 2014 Three computational techniques for approximation of counterparty exposure for financial derivatives are presented. The exposure can be used to quantify so-called Credit Valuation Adjustment (CVA) and Potential Future Exposure (PFE), which are of utmost importance for modern risk management in the financial industry, especially since the recent credit ...
Cornelis de Graaf +3 more
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Managing Counterparty Credit Risk Via BSDEs [PDF]
SSRN Electronic Journal, 2016 We discuss a general dynamic replication approach to counterparty credit risk modeling. This leads to a fundamental jump-process backward stochastic differential equation (BSDE) for the credit risk adjusted portfolio value. We then reduce the fundamental BSDE to a continuous BSDE.
Lesniewski, Andrew, Richter, Anja
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Counterparty Credit Limits: An Effective Tool for Mitigating Counterparty Risk? [PDF]
SSRN Electronic Journal, 2017 A counterparty credit limit (CCL) is a limit imposed by a financial institution to cap its maximum possible exposure to a specified counterparty. Although CCLs are designed to help institutions mitigate counterparty risk by selective diversification of their exposures, their implementation restricts the liquidity that institutions can access in an ...
Martin Gould +3 more
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Counterparty Credit Risk and American Options
The Journal of Derivatives, 2010 One of the many counterintuitive things students in a first course on options learn is that premature exercise of an American call option on a nondividend paying stock is a mistake, and that for a dividend-paying stock, early exercise is never rational except just before the stock goes ex-dividend. Efforts to incorporate counterparty credit risk in the
Peter G. Klein, Jun Yang
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