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Counterparty risk: credit valuation adjustment variability and value-at-risk
Journal of Risk, 2019The third installment of the Basel Accords advocates a capital charge against credit valuation adjustment (CVA) variability. We propose an efficient numerical approach that allows us to compute risk measures for the CVA process by assessing the distribution of the CVA at a given horizon.
Michèle Breton, Oussama Marzouk
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Advanced Estimation of Credit Valuation Adjustment
2017Numerical ...
Q. Feng
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Credit valuation adjustment wrong-way risk in a Gaussian copula model
Journal of Credit Risk, 2019The credit valuation adjustment (CVA) is currently calculated in financial institutions to measure counterparty credit risk (CCR) on over-the-counter derivatives. A key factor in CVA is wrong-way risk (WWR): the correlation between counterparty exposures and credit qualities. In this paper, we present an analytical expression for CVA with WWR under the
Kelin Pan, Chandra Khandrika
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Jumping with Default: Wrong-Way-Risk Modeling for Credit Valuation Adjustment [PDF]
SSRN Electronic Journal, 2015 We investigate credit value adjustments (CVAs) in the presence of wrong-way risk (WWR) by introducing jumps at default to model correlation between counterparty's default and relevant risk factors. We focus on the foreign-exchange and interest-rate cases, presenting efficient CVA approximations based on CVA computation under independence assumption ...
Fabio Mercurio, Minqiang Li
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Pricing CDS spreads with Credit Valuation Adjustment using a mixture copula
Research in International Business and Finance, 2017Abstract Credit derivatives pricing models before Basel III ignored losses in market value stemming from higher probability of counterparty default. We propose a general credit derivatives pricing model to evaluate a Credit Default Swap (CDS) with counterparty risk, including the Credit Valuation Adjustment (CVA) in order to optimize the economic ...
Waël Louhichi, Étienne Harb
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Credit valuation adjustment modelling during a global low interest rate environment [PDF]
, 2015 The 2008/2009 global crisis highlighted the vulnerabilities and inter-dependencies in the financial system including the global over-the-counter (OTC) derivatives markets, where significant counterparty credit risk prevails. In this paper, we deal with risk under Basel III banking regulation and provide credit valuation adjustment (CVA) modelling ...
Petr Macek, Petr Teply
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2018
The derivative positions are subject to changes due to market volatility which changes the exposure to counterparty risk and the credit quality of the counterparty. Against this background, banks should keep aside additional capital, known as credit valuation adjustments (CVAs) capital charge, which stands for the difference between the risk-free and ...
Ioannis Akkizidis, Lampros Kalyvas
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The derivative positions are subject to changes due to market volatility which changes the exposure to counterparty risk and the credit quality of the counterparty. Against this background, banks should keep aside additional capital, known as credit valuation adjustments (CVAs) capital charge, which stands for the difference between the risk-free and ...
Ioannis Akkizidis, Lampros Kalyvas
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A method for pricing the credit valuation adjustment of unlisted companies
Journal of Risk Management in Financial Institutions, 2019Estimating the credit valuation adjustment (CVA) for unlisted companies is a challenging issue because it is not possible to estimate the risk neutral default probability from either the credit default swap (CDS) par spread or equity stock.
Matteo Formenti
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EXTREMAL DEPENDENCE FOR BILATERAL CREDIT VALUATION ADJUSTMENTS
International Journal of Theoretical and Applied Finance, 2016Recognizing counterparty default risk as integral part of the valuation process of financial derivatives has changed the classical view on option pricing. Calculating the bilateral credit valuation adjustment (BCVA) including wrong way risk (WWR) requires a sound model for the dependence structure between three quantities: the default times of the two
Matthias Scherer, T. Schulz
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