Counterparty Credit Risk and CVA Workshop
Day One
9:00 – 10:30 Background
- Historical perspective
- Mitigating counterparty risk
- Credit lines
- Models and computation
- Regulation
10:30 – 10:45 Break
10:45 – 12:30 The components of CVA
- Why is CVA so complex?
- Credit exposure
- Default probability
- Recovery rates
12:30 – 13:30 Lunch break
13:30 – 15:15 Credit exposure
- Typical credit exposure profiles
- Simulation methodology for exposure
- Incremental and marginal exposure
- The impact of collateral
Example :i) simulating the exposure for an interest rate swap, ii) calculatingincremental and marginal exposure and calculating exposure with CSAs
15:15 – 15:30 Break
15:30 – 17:00 Credit value adjustment (CVA)
- The CVA of a swap
- CVA formulas
- CVA examples
- Incremental and marginal CVA
Examples : calculating CVA – comparing the standard and approximate formulas.
Examples for different instruments. Calculating incremental CVA.
Day Two
9:00 – 10:30 CVA complexities
- CVA and collateral
- Bilateral CVA (DVA)
- The problems with DVA
- Funding
Examples :Calculating CVA including netting and collateral. Calculating DVA.
10:30 – 10:45 Break
10:45 – 12:30 Wrong way risk
- Evidence and examples of wrong-way risk
- Examples for FX, commodities and options
- Credit derivatives
- Monoline insurers
- Central counterparties
Examples : Pragmatic wrong way risk approaches
12:30 – 13:30 Lunch break
13:30 – 15:15 Regulatory Capital
- The impact of PFE at the portfolio level
- The alpha factor
- Basel 2 and EEPE definitions
- Basel changes post crisis
- CVA VAR
15:15 – 15:30 Break
15:30 – 17:00 Management of CVA
- Approaches to manage CVA
- Double default
- Dynamic hedging and CVA greeks
- Hedging and DVA
- Hedging in practice
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