Restructuring Counterparty Credit Risk

Counterparty credit risk and the credit default swap market

Counterparty credit risk has become one of the highest-profile risks facing participants in the financial markets. Despite this, relatively little is known about how counterparty credit risk is actually priced. We examine this issue using an extensive proprietary data set of contemporaneous CDS transaction prices and quotes by 14 different CDS dealers selling credit protection on the same under...

Credit Default Swap Valuation with Counterparty Risk ∗

Using the reduced form framework with inter-dependent default correlation, we perform valuation of credit default swap with counterparty risk. The inter-dependent default risk structure between the protection buyer, protection seller and the reference entity in a credit default swap are characterized by their correlated default intensities, where the default intensity of one party increases whe...

Counterparty Credit Risk Modeling: Risk Management, Pricing and Regulation

* Marco Tarenghi contributed to the numerical part on the Equity Return Swap example. We are grateful to Aurelien Alfonsi, Eymen Errais and Massimo Morini for comments and suggestions. Umberto Cherubini helped us with references and further suggestions.

CVA computation for counterparty risk assessment in credit portfolios

We first derive a general counterparty risk representation formula for the Credit Value Adjustment (CVA) of a netted and collateralized portfolio. This result is then specified to the case, most challenging from the modelling and numerical point of view, of counterparty credit risk. Our general results are essentially model free. Thus, although they are theoretically pleasing, they do not immed...

Counterparty Credit Risk by Jon Gregory Reviewed By