Download e-book for iPad: Counterparty Credit Risk, Collateral and Funding: With by Damiano Brigo

By Damiano Brigo

ISBN-10: 047074846X

ISBN-13: 9780470748466

The book’s content material is concentrated on rigorous and complicated quantitative equipment for the pricing and hedging of counterparty credits and investment possibility. the hot normal concept that's required for this system is built from scratch, resulting in a constant and complete framework for counterparty credits and investment hazard, which includes collateral, netting principles, attainable debit valuation changes, re-hypothecation and closeout principles. The ebook even though additionally seems to be at rather sensible difficulties, linking specific types to specific ‘concrete’ monetary events throughout asset sessions, together with rates of interest, FX, commodities, fairness, credits itself, and the rising asset classification of longevity.

The authors additionally goal to aid quantitative analysts, investors, and a person else desiring to border and cost  counterparty credits and investment possibility, to improve a ‘feel’ for using refined arithmetic and stochastic calculus to unravel useful problems.

The major types are illustrated from theoretical formula to ultimate implementation with calibration to marketplace facts, continuously conserving in brain the concrete questions being handled. The authors pressure that every version is fitted to assorted events and items, mentioning that there doesn't exist a unmarried version that is uniformly greater than the entire others, even supposing the issues originated by means of counterparty credits and investment possibility element towards worldwide valuation.

Finally, proposals for restructuring counterparty credits probability, starting from contingent credits default swaps to margin lending, are considered.

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Extra info for Counterparty Credit Risk, Collateral and Funding: With Pricing Cases for All Asset Classes

Example text

I wouldn’t mind living a long time, provided the quality of life is good. It is not a risk for you, it is a risk for your pension provider. If you live longer than expected then the pension fund needs extra funding to keep your pension going. Right [touching the wooden table]. [Laughing] If you find the name disturbing, we may call it mortality risk. Anyway with longevity swaps the problem is also finding the underlying ????-dynamics, both in levels and volatilities, namely levels and volatilities of mortality rates.

Stefan Walter) Q: I am quite confused. Should I compute DVA or not? A: It depends on the purpose you are computing it for. However, the situation is not that clear, there are a number of issues more generally with counterparty risk pricing. Q: You mean objectivity on CVA valuation? A: I mean that there is a lot of model risk and of “payoff risk” if we want to call it that. Q: I understand model risk, since this is highly model dependent, but what do you mean by payoff risk? A: There are a lot of choices to be made when computing CVA, both on the models used, and on the type of CVA to be computed.

What about the underlying contract ???? dynamics, is that clear for all asset classes? For a number of asset classes, traditional derivatives markets provide you with underlying market levels, volatilities and market-market “correlations”. But not always. Can you provide an example where this does not work? 9 EMERGING ASSET CLASSES: LONGEVITY RISK A: Q: A: Q: A: Q: A: Q: A: Q: A: Let me think . . yes, that could be a good example, Longevity Risk. I was never sure how to pronounce that in English.

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Counterparty Credit Risk, Collateral and Funding: With Pricing Cases for All Asset Classes by Damiano Brigo

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