57 Pages Posted: 5 Nov 2011 Last revised: 18 Jun 2012
Date Written: 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.
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, H63
Suggested Citation: Suggested Citation
Brigo, Damiano, Counterparty Risk FAQ: Credit VaR, PFE, CVA, DVA, Closeout, Netting, Collateral, Re-Hypothecation, WWR, Basel, Funding, CCDS and Margin Lending (June 17, 2012). Available at SSRN: https://ssrn.com/abstract=1955204 or http://dx.doi.org/10.2139/ssrn.1955204
By James Chen