The xVA Challenge: Counterparty Credit Risk, Funding. JON GREGORY is an independent expert specialising in counterparty risk and related aspects. He has worked on many aspects of credit risk in his career, being. Counterparty credit risk has become the key element of financial risk management, Dr Jon Gregory is a consultant specialising in the area of counterparty risk.

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You are currently using the site but have requested a page in the site. Would you like to change to the site? This book explains the emergence of counterparty risk during the recent credit crisis. The quantification of firm-wide credit exposure for trading desks gegory businesses is discussed alongside risk mitigation methods such as netting and collateral management margining.

Banks and riso financial institutions have been recently developing their capabilities for pricing counterparty risk and these elements are considered in detail via a characterisation of credit value adjustment CVA. The implications of an institution valuing their own default via debt value adjustment DVA are also considered at length. A key feature of the credit crisis has been the realisation of wrong-way risks illustrated by the failure of monoline insurance companies.

Wrong-way counterparty risks are addressed in detail in relation to interest rate, foreign exchange, commodity and, in particular, credit derivative products.

Portfolio counterparty risk is covered, together with the regulatory aspects gregoey defined by the Basel II capital requirements. The coknterparty of counterparty risk within an institution is also discussed in detail. Finally, the design and benefits of central clearing, a recent development to attempt to control the rapid growth of counterparty risk, is considered.


This book is unique in counteeparty practically focused but also covering the more technical aspects. It is an invaluable complete reference guide for any market practitioner with any responsibility or interest within the area of counterparty credit risk.

Request permission to reuse content from this site. A Computing the EE of a typical forward exposure with correlation to a time of default.

The new challenge for global financial markets. Added to Your Shopping Cart. Description The first decade of the 21st Century has been disastrous for financial institutions, derivatives and risk management.

Counterparty crevit risk has become the key element of financial risk management, highlighted by the bankruptcy of the investment bank Lehman Brothers and failure of non high profile institutions such as Bear Sterns, AIG, Fannie Mae and Freddie Mac. The sudden realisation of extensive counterparty risks has severely compromised the health of global financial markets. Counterparty risk is now a key problem for all gregorh institutions. About the Author Dr Jon Gregory is a consultant specialising in the area of counterparty risk.

He started his career at Salomon Brothers now Citigroup. From tohe worked for BNP Paribas, initially developing the framework for the pricing and management of counterparty risk for the fixed income division and later being part of the rapid growth of the credit derivatives business. He has published many papers in the area of credit rlsk, recently looking at some of the complex counterparty risk issues in relation to the credit crisis. Inhe was co-author of the book Credit: Jon holds a PhD from Cambridge University.


Permissions Request permission to reuse content from this site. Table of contents Acknowledgements. A Characterising exposure for a normal distribution.

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A EE of independent normal variables. A Semi-analytical formula for exposure of a forward contract. B Computing marginal EE. The Impact of Collateral.

A Calculation of collateralised PFE cash collateral.

B Calculation of collateralised netted exposure with collateral value uncertainty. C Mathematical treatment of a collateralised exposure.

A Defining survival and default probabilities. B Pricing formulas for CDSs and risky bonds. C Pricing of index tranches. A Deriving the equation for credit value adjustment CVA. B Approximation to the CVA formula in the case of no wrong-way risk.

C Approximation linking CVA formula to credit spread. D Specific approximations to the CVA formula for individual instruments. E Calculation of CVA increase in the presence of credut. B Formula for a risky option.

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C Formula for pricing a CDS contract with counterparty risk. D Pricing of a leveraged super senior tranche.

A Credit portfolio model. B Simple treatment of wrong-way risk. A Effective remaining maturity.

The xVA Challenge: Counterparty Credit Risk, Funding, Collateral and Capital, 3rd Edition

D Definition of effective EPE. E Double-default treatment of hedged exposures in Basel II. A Simple model for a credit insurer.

B The valuation of credit insurer purchased protection. Series The Wiley Finance Series.