Credit risk - Risk management - Risk.net

Credit rating agencies: what are the alternatives for energy markets?

Tue, 07 Feb 2012 09:30:00 GMT

Beyond the big three Repeated stumbles by the credit rating agencies have led risk managers to explore new ways of assessing counterparties. Alexander Osipovich examines the alternatives

European capital rules could squash CVA feedback loop

Mon, 06 Feb 2012 17:32:56 GMT

Risk.net

European capital rules could squash CVA feedback loop The European Parliament version of CRD IV exempts trades with non-financials from Basel III's CVA capital charge - and dealers are hoping it covers sovereigns as well as corporates

Eurex to offer full segregation in March launch of OTC clearing

Mon, 06 Feb 2012 17:31:00 GMT

Risk.net

Eurex Clearing plans to be the first OTC clearer to offer full segregation of collateral when it launches in March - demand has risen since MF Global collapse

Basel 2.5: US ratings workaround criticised

Mon, 06 Feb 2012 17:18:00 GMT

Risk.net

Workaround woes US regulators published a proposal in December that would enable domestic banks to implement market risk capital rules without relying on credit ratings. But bankers claim the rules are overly conservative and put them at a competitive disadvantage. Do they have a point? Mark Pengelly investigates

Conversion of upfront CVA into running CVA

Tue, 31 Jan 2012 11:27:37 GMT

Risk.net

Conversion of upfront CVA into running CVA The credit value adjustment that crystallises counterparty risk in a derivatives price is generally thought of as an upfront payment, but could equally well be converted into a running premium in appropriate products. But the obvious ways to do this lead to inconsistencies, or are computationally burdensome. Here, Frédéric Vrins and Jon Gregory show how an analytic approximation can get round this

Japan still backs EFSF despite threat to triple-A rating

Mon, 16 Jan 2012 16:11:26 GMT

Risk.net

The expectation that Standard & Poor’s decision to downgrade France and Austria will have a knock-on downward impact on the EFSF will not deter further Japanese investment in its bonds

Japan still backs EFSF despite threat to AAA rating

Mon, 16 Jan 2012 16:11:00 GMT

Risk.net

The expectation that Standard & Poor’s decision to downgrade France and Austria will have a knock-on impact on the EFSF will not deter further Japanese investment in its bonds, says Japanese official

The dollar dominance dispute

Mon, 19 Dec 2011 08:10:18 GMT

Risk.net

Disputes over the valuation of collateralised derivatives trades have pushed the industry to develop a new standard credit support annex. A solution has been proposed – but some Asian banks have raised concerns about the dominant role given to the US dollar in the new framework. Are their concerns justified?

European Insurers face downgrades amid continuing sovereign debt crisis

Fri, 16 Dec 2011 15:41:15 GMT

Risk.net

Generali subsidiaries and Groupama receive downgrades; Aviva placed under review

The CVA-CDS feedback loop

Wed, 14 Dec 2011 16:17:00 GMT

Risk.net

The CVA-CDS feedback loop Dealers claim regulators have cooked up a pro-cyclical credit value adjustment (CVA) capital charge that encourages CVA desks to buy credit default swap protection as a hedge. This could push spreads wider, increasing the CVA capital charge and so prompting more protection buying

Quants call for Isda to clarify close-out values

Sun, 11 Dec 2011 00:05:00 GMT

Risk.net

Leading quants highlight ambiguity in Isda master agreement - but warn that resolving the issue could worsen systemic risk

MF Global: lessons for OTC from a futures clearing calamity

Thu, 08 Dec 2011 22:32:39 GMT

Risk.net

MF doom

Cutting Edge introduction: clarity needed on credit adjustments

Thu, 08 Dec 2011 19:17:00 GMT

Risk.net

Credit and credibility A debate over whether to include counterparty risk adjustments at the point of default is animating quants, but either of the obvious answers could exacerbate systemic risk. Laurie Carver introduces this month’s technical papers

Cutting Edge: the year of CVA

Thu, 08 Dec 2011 19:14:00 GMT

Risk.net

The year of CVA With derivatives counterparty risk rocketing up the agenda this year, researchers have tried to shed some light on the associated challenges - from capital calculation to pricing - as the annual round-up of Risk's technical papers and citations shows. By Laurie Carver

Close-out convention tensions

Thu, 08 Dec 2011 12:50:00 GMT

Risk.net

Close-out convention tensions There is an ambiguity in the market about the convention for valuing a derivative’s close-out value to be settled at default – in particular whether or not to include adjustments for the credit risk of the surviving party. Damiano Brigo and Massimo Morini show how to include these adjustments and take seriously the differences in the convention choice – and find that while the risk-free close-out can exacerbate contagion by increasing debtors’ liabilities, in highly correlated environments the risky close-out can dramatically lower the recovery received by creditors

New standard CSA too dollar-centric, say Asian banks

Thu, 08 Dec 2011 07:06:00 GMT

Risk.net

Banks in Asia-Pacific complain about dollar dominance in new standard CSA – prompting Isda to rethink its plans

New standard CSA too dollar-centric, say Asian banks

Thu, 08 Dec 2011 07:06:00 GMT

Risk.net

Banks in Asia-Pacific complain about dollar dominance in new standard CSA – prompting Isda to rethink its plans

MF Global: non-US clients caught in cross-border collateral trap

Wed, 07 Dec 2011 09:53:00 GMT

Risk.net

Omnibus structure meant clearing clients of MF Global outside the US were asked to double up on collateral payments. Use of the structure for OTC markets is now in doubt

Is asset-backed credit support an option for energy firms?

Mon, 05 Dec 2011 10:23:31 GMT

Risk.net

Coming up with the money Asset-backed credit support could be a viable option for energy producers wishing to better utilise the value of their assets to manage collateral obligations under hedge transactions, write Chad Mills, Chris Hayes and Jon Hoff

Eksportfinans faces collateral questions following downgrade

Wed, 30 Nov 2011 13:46:00 GMT

Risk.net

Junk-rated export lender says it has enough reserve liquidity to meet obligations while it is being wound up - but dealers are not convinced

ECB offers CSDs financial incentives for early T2S adoption

Fri, 25 Nov 2011 12:27:14 GMT

Risk.net

European Central Bank offers central securities depositories (CSDs) financial incentives to sign up to T2S early; governing council gives CSDs until the end of April to agree

Banque de France outsources collateral management

Fri, 25 Nov 2011 12:23:15 GMT

Risk.net

French central bank agrees collateral management deal with Euroclear France; entire French banking community will use new system next year

Commission unveils contentious Eurobond proposals

Thu, 24 Nov 2011 11:31:24 GMT

Risk.net

European Commission unveils three options for Eurobonds in bid to restore stability in Europe; analysts say the measures are politically unviable and ineffective

EU proposals for credit ratings rules require close monitoring by hedge funds

Wed, 23 Nov 2011 11:16:03 GMT

Risk.net

Draft language could affect the way hedge funds perform their own internal credit analysis

Sean Kavanagh leaves Deutsche Bank for Citi

Thu, 10 Nov 2011 17:26:00 GMT

Risk.net

Loan risk manager takes newly created job as head of credit portfolio management at Citi