Counterparty Risk FAQ: Credit VaR, PFE, CVA, DVA, Closeout, Netting, Collateral, Re-Hypothecation, WWR, Basel, Funding, CCDS and Margin Lending
Department of Mathematics, Imperial College, London; Capco
June 17, 2012
We present a dialogue on Counterparty Credit Risk touching on Credit Value at Risk (Credit VaR), Potential Future Exposure (PFE), Expected Exposure (EE), Expected Positive Exposure (EPE), Credit Valuation Adjustment (CVA), Debit Valuation Adjustment (DVA), DVA Hedging, Closeout conventions, Netting clauses, Collateral modeling, Gap Risk, Re-hypothecation, Wrong Way Risk, Basel III, inclusion of Funding costs, First to Default risk, Contingent Credit Default Swaps (CCDS) and CVA restructuring possibilities through margin lending. The dialogue is in the form of a Q&A between a CVA expert and a newly hired colleague.
Number of Pages in PDF File: 57
Keywords: Counterparty Risk, Credit Risk, Credit VaR, Exposure, Credit Valuation Adjustment, Debit Valuation Adjustment, Closeout, Netting, Collateral, Re-hypothecation, Wrong Way Risk, Base lII, Funding Costs, CCDS, Margin Lending
JEL Classification: G13, G33, H63working papers series
Date posted: November 5, 2011 ; Last revised: June 18, 2012
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