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| Introduction | |
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| Introduction | |
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| Background | |
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| Introduction | |
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| Financial risk | |
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| Value-at-risk | |
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| The derivatives market | |
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| Counterparty risk in context | |
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| Summary | |
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| Defining Counterparty Credit Risk | |
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| Introducing counterparty credit risk | |
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| Components and terminology | |
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| Control and quantification | |
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| Summary | |
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| Mitigation Of Counterparty Credit Risk | |
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| Netting, Compression, Resets and Termination Features | |
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| Introduction | |
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| Netting | |
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| Termination features and trade compression | |
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| Conclusion | |
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| Collateral | |
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| Introduction | |
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| Collateral terms | |
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| Defining the amount of collateral | |
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| The risks of collateralisation | |
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| Summary | |
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| Default Remote Entities and the Too Big to Fail Problem | |
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| Introduction | |
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| Special purpose vehicles | |
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| Derivative product companies | |
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| Monolines and credit DPCs | |
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| Central counterparties | |
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| Central Counterparties | |
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| Centralised clearing | |
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| Logistics of central clearing | |
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| Analysis of the impact and benefits of CCPs | |
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| Conclusions | |
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| Credit Exposure | |
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| Credit exposure | |
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| Metrics for credit exposure | |
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| Factors driving credit exposure | |
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| Understanding the impact of netting on exposure | |
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| Credit exposure and collateral | |
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| Risk-neutral or real-world? | |
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| Summary | |
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| Credit Value Adjustment | |
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| Quantifying Credit Exposure | |
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| Introduction | |
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| Methods for quantifying credit exposure | |
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| Monte Carlo methodology | |
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| Models for credit exposure | |
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| Netting examples | |
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| Allocating exposure | |
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| Exposure and collateral | |
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| Summary | |
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| Default Probability, Credit Spreads and Credit Derivatives | |
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| Default probability and recovery rates | |
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| Credit default swaps | |
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| Curve mapping | |
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| Portfolio credit derivatives | |
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| Summary | |
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| Portfolio Counterparty Credit Risk | |
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| Introduction | |
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| Double default | |
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| Credit portfolio losses | |
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| Summary | |
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| Credit Value Adjustment | |
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| Definition of CVA | |
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| CVA and exposure | |
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| Impact of default probability and recovery | |
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| Pricing new trades using CVA | |
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| CVA with collateral | |
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| Summary | |
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| Debt Value Adjustment | |
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| DVA and counterparty risk | |
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| The DVA controversy | |
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| How to monetise DVA | |
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| Further DVA considerations | |
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| Summary | |
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| Funding and Valuation | |
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| Background | |
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| OIS discounting | |
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| Funding value adjustment | |
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| Optimisation of CVA, DVA and funding costs | |
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| Future trends | |
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| Summary | |
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| Wrong-Way Risk | |
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| Introduction | |
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| Overview of wrong-way risk | |
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| Portfolio wrong-way risk | |
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| Trade-level wrong-way risk | |
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| Wrong-way risk and credit derivatives | |
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| Summary | |
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| Managing Counterparty Credit Risk | |
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| Hedging Counterparty Risk | |
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| Background to CVA hedging | |
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| Component of CVA hedging | |
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| Exposure hedges | |
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| Credit hedges | |
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| Cross-dependency | |
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| The impact of DVA and collateral | |
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| Summary | |
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| Regulation and Capital Requirements | |
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| Introduction | |
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| Basel II | |
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| Exposure under Basel II | |
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| Basel III | |
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| Central counterparties | |
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| Summary | |
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| Managing CVA - The "CVA Desk" | |
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| Introduction | |
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| The role of a CVA desk | |
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| CVA charging | |
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| Technology | |
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| Practical hedging of CVA | |
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| Summary | |
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| The Future of Counterparty Risk | |
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| Key components | |
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| Key axes of development | |
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| The continuing challenge for global financial markets | |
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| References | |
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| Index | |