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Pricing Counterparty Credit Risk
2015Until 2008, counterparty credit risk in books of OTC derivatives was seen as a secondary risk This was for a number of reasons Most counterparties had strong credit ratings and the world economy was going through a phase of low defaults As a result, the risk of counterparties defaulting was seen as negligible Also, the complexity of pricing, managing ...
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2016
Since the Lehman default on September 15, 2008 the credit quality of issuers of retail products has received much attention. Arguably, the largest losses to institutions during the crisis were due to credit value adjustment (CVA) rather than to actual default.
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Since the Lehman default on September 15, 2008 the credit quality of issuers of retail products has received much attention. Arguably, the largest losses to institutions during the crisis were due to credit value adjustment (CVA) rather than to actual default.
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Pricing Counterparty Credit Risk
2009We have analysed in the previous chapters the most straightforward ways of mitigating the risk of default of a counterparty, namely by imposing limits on transacted notional amounts and by negotiating collateral agreements with the counterparty.
Giovanni Cesari +5 more
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Counterparty credit risk and the credit default swap market
Journal of Financial Economics, 2011Abstract Counterparty credit risk has become one of the highest-profile risks facing participants in the financial markets. Despite this, relatively little is known about how counterparty credit risk is actually priced. We examine this issue using an extensive proprietary data set of contemporaneous CDS transaction prices and quotes by 14 different ...
Priyank Gandhi +2 more
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Counterparty Credit Risk Models
2016In Part 2, we have discussed the validation of models for credit risk by looking at the three components of the regulatory formula for risk-weighted assets: probability of default, loss given default and exposure at default. In this chapter we turn to a type of credit risk that has become extremely important in the wake of the 2008 financial crisis and
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COUNTERPARTY CREDIT RISK IN A CLEARING NETWORK
International Journal of Theoretical and Applied Finance, 2020In this paper, we offer a network model that derives the expected counterparty risk of an arbitrary market after netting in a closed-form expression. Graph theory is used to represent market participants and their relationship among each other. We apply the powerful theory of characteristic functions (c.f.) and Hilbert transforms to determine the ...
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Derivative Credit Risk (Counterparty Risk)
2017The points discussed in the previous chapters could give the impression that credit risk can only occur if a creditor lends money to a borrower, but this is not the case, as when a derivative is contracted this generates a new risk whereby, should the case arise, the other party in the contract fails to meet their obligations; this risk is a particular
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Counterparty Credit Risk in OTC Derivatives
SSRN Electronic Journal, 2019We document how counterparty credit risk is priced in FX OTC derivatives. We employ a novel data-set of dealer-specific bid-ask quotes to analyze risk pricing using the decoupling of Swiss franc from the euro as an exogenous shock. First, the removal of the peg increased both the level of volatility and dealers' sensitivity to volatility for the FX ...
Florian Balke +3 more
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Explicit pricing formulas for vulnerable path-dependent options with early counterparty credit risk
Japan journal of industrial and applied mathematics, 2022Donghyun Kim, Ji‐Hun Yoon
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Analytical Expressions to Counterparty Credit Risk Exposures for Interest Rate Derivatives
Acta Mathematicae Applicatae Sinica (English Series), 2022Shuang Li +4 more
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