Counterparty Credit Risk and Credit Value Adjustment: A Continuing Challenge for Global Financial Markets, 2nd Edition

Table of contents

1. Cover
2. Title Page
3. Copyright
4. Dedication
5. Acknowledgements
6. List of Spreadsheets
7. List of Appendices
8. Section I: Introduction
   1. Chapter 1: Introduction
   2. Chapter 2: Background
      1. 2.1 Introduction
      2. 2.2 Financial Risk
      3. 2.3 Value-at-Risk
      4. 2.4 The Derivatives Market
      5. 2.5 Counterparty Risk in Context
      6. 2.6 Summary
   3. Chapter 3: Defining Counterparty Credit Risk
      1. 3.1 Introducing Counterparty Credit Risk
      2. 3.2 Components and Terminology
      3. 3.3 Control and Quantification
      4. 3.4 Summary
9. Section II: Mitigation of Counterparty Credit Risk
   1. Chapter 4: Netting, Compression, Resets and Termination Features
      1. 4.1 Introduction
      2. 4.2 Netting
      3. 4.3 Termination Features and Trade Compression
      4. 4.4 Conclusion
   2. Chapter 5: Collateral
      1. 5.1 Introduction
      2. 5.2 Collateral Terms
      3. 5.3 Defining the Amount of Collateral
      4. 5.4 The Risks of Collateralisation
      5. 5.5 Summary
   3. Chapter 6: Default Remote Entities and the Too Big to Fail Problem
      1. 6.1 Introduction
      2. 6.2 Special Purpose Vehicles4
      3. 6.3 Derivative Product Companies
      4. 6.4 Monolines and Credit DPCs
      5. 6.5 Central Counterparties
   4. Chapter 7: Central Counterparties
      1. 7.1 Centralised Clearing
      2. 7.2 Logistics of Central Clearing
      3. 7.3 Analysis of the Impact and Benefits of CCPs
      4. 7.4 Conclusions
   5. Chapter 8: Credit Exposure
      1. 8.1 Credit Exposure
      2. 8.2 Metrics for Credit Exposure
      3. 8.3 Factors Driving Credit Exposure
      4. 8.4 Understanding the Impact of Netting on Exposure
      5. 8.5 Credit Exposure and Collateral
      6. 8.6 Risk-Neutral or Real-World?
      7. 8.7 Summary
10. Section III: Credit Value Adjustment
    1. Chapter 9: Quantifying Credit Exposure
       1. 9.1 Introduction
       2. 9.2 Methods for Quantifying Credit Exposure
       3. 9.3 Monte Carlo Methodology
       4. 9.4 Models for Credit Exposure
       5. 9.5 Netting Examples
       6. 9.6 Allocating Exposure
       7. 9.7 Exposure and Collateral
       8. 9.8 Summary
    2. Chapter 10: Default Probability, Credit Spreads and Credit Derivatives
       1. 10.1 Default Probability and Recovery Rates
       2. 10.2 Credit Default Swaps
       3. 10.3 Curve Mapping
       4. 10.4 Portfolio Credit Derivatives
       5. 10.5 Summary
    3. Chapter 11: Portfolio Counterparty Credit Risk
       1. 11.1 Introduction
       2. 11.2 Double Default
       3. 11.3 Credit Portfolio Losses
       4. 11.4 Summary
    4. Chapter 12: Credit Value Adjustment
       1. 12.1 Definition of CVA
       2. 12.2 CVA and Exposure
       3. 12.3 Impact of Default Probability and Recovery
       4. 12.4 Pricing New Trades Using CVA
       5. 12.5 CVA with Collateral
       6. 12.6 Summary
    5. Chapter 13: Debt Value Adjustment
       1. 13.1 DVA and Counterparty Risk
       2. 13.2 The DVA Controversy
       3. 13.3 How to Monetise DVA
       4. 13.4 Further DVA Considerations
       5. 13.5 Summary
    6. Chapter 14: Funding and Valuation
       1. 14.1 Background
       2. 14.2 OIS Discounting
       3. 14.3 Funding Value Adjustment
       4. 14.4 Optimisation of CVA, DVA and Funding Costs
       5. 14.5 Future Trends
       6. 14.6 Summary
    7. Chapter 15: Wrong-Way Risk
       1. 15.1 Introduction
       2. 15.2 Overview of Wrong-way Risk
       3. 15.3 Portfolio Wrong-way Risk
       4. 15.4 Trade-level Wrong-way Risk
       5. 15.5 Wrong-way Risk and Credit Derivatives
       6. 15.6 Summary
11. Section IV: Managing Counterparty Credit Risk
    1. Chapter 16: Hedging Counterparty Risk
       1. 16.1 Background to CVA Hedging
       2. 16.2 Components of CVA Hedging
       3. 16.3 Exposure Hedges
       4. 16.4 Credit Hedges
       5. 16.5 Cross-dependency
       6. 16.6 The Impact of DVA and Collateral
       7. 16.7 Summary
    2. Chapter 17: Regulation and Capital Requirements
       1. 17.1 Introduction
       2. 17.2 Basel II
       3. 17.3 Exposure Under Basel II
       4. 17.4 Basel III
       5. 17.5 Central Counterparties
       6. 17.6 Summary
    3. Chapter 18: Managing CVA – The “CVA Desk”
       1. 18.1 Introduction
       2. 18.2 The Role of a CVA Desk
       3. 18.3 CVA Charging
       4. 18.4 Technology
       5. 18.5 Practical Hedging of CVA
       6. 18.6 Summary
    4. Chapter 19: The Future of Counterparty Risk
       1. 19.1 Key Components
       2. 19.2 Key Axes of Development
       3. 19.3 The Continuing Challenge for Global Financial Markets
12. References
13. Index