Lecture_7_CVA_201820180402201111

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CVAOutline1 IntroductionCounterparty RiskExposures2 CVAGeneral FrameworkUnilateral CVA3 CVA CalculationGeneral FrameworkWrong Way RiskMonte Carlo Valuation4 Case StudiesCase Study 1: Single Interest Rate Swap (IRS)Case Study 2: Portfolio of IRS5 Mitigating Counterparty ExposureNettingCollateral6 Selected ReferencesPaola Mosconi 20541 – Lecture 10-11 18 / 86
CVAGeneral FrameworkCredit Value Adjustment: IntroductionCredit Value Adjustment (CVA) tries to measure the expected loss dueto missing the remaining payments.CVA has become an integral part of IAS 39 accounting rules and Basel IIIregulatory requirements.CVA is defined as:1 the difference between the risk-free value and the risky value of one ormore trades or, alternatively,2 the expected loss arising from a future counterparty default.Paola Mosconi 20541 – Lecture 10-11 19 / 86
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Selected ReferencesOutline1 Introdu
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