Credit Value Adjustment

Generic evaluation of counterparty risk
  • The difference between:
  • Potential Future Exposure at default (PFED)
  • Expected Positive Exposure (EPE)
  • Effective EPE
  • Exposure at Default (EAD)
  • CVA
  • Unilateral CVA
  • Bilateral CVA with or without simultaneous defaults
  • Example of a Gaussian copula
  • CSA transactions (collateral) and non CSA
  • Wrong way risk: correlation between the contract value and counterparty default
Application to derivatives
  • IRS
  • Netted swaps portfolios
  • European swaptions
  • Bermudan swaptions
  • CDS

  • Master the various methods of counterparty risk valuation.
  • Understand and know how to quantify the impact of counterparty risk over the valorisation of derivatives
  • Understand how to centralise this risk (CVA desk) and manage it
  • Know the impacts that regulatory developments have over equity capital
  • Awareness of all aspects of counterparty risk (assessment, coverage, equity capital...)
  • Implementation of credit value adjustment in portfolios and positions of vanilla and exotic derivatives
  • Risk management
  • Financial directors
  • Sales / Traders
  • Counterparty desk
  • Inspection / Audit / Internal control
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