|
|
 Login |
|
|
|
Volume 5/Number 4, Winter 2009/10 Research Papers Modeling credit exposure for collateralized counterparties Michael Pykhtin
Federal Reserve Board, Mail Stop 1813, 20th Street and Constitution Avenue, NW, Washington DC 20551, USA; email: michael.v.pykhtin@frb.gov Modeling the credit exposure of a financial institution to a counterparty usually requires a Monte Carlo simulation of values of the trades in the portfolio at future time points. For collateralized counterparties, collateral at any simulation time point depends on the portfolio value at an earlier time point because of the margin period of risk. Thus, in order to simulate collateralized exposure at a single (primary) time point, one needs to simulate the trade values at two time points: the primary and the look-back, resulting in a doubling of the total simulation time. In this paper we present a semi-analytical method for calculating expected exposure for collateralized counterparties that does not require the simulation of the trade values at the look-back time points. This method can be easily implemented with an existing system that simulates uncollateralized exposure, without a noticeable increase in the simulation time. Potential applications of the method include the pricing and hedging of counterparty credit risk and the calculation of economic and regulatory capital.
|
|
|
|
What to do if you do not know your username and password:
• If you are a The Journal of Credit Risk subscriber, click here and we will email you straight away with your username and password.
What to do if you are not a The Journal of Credit Risk subscriber:
• Click here to subscribe now.
• Click here for a FREE online sample.
Further information about The Journal of Credit Risk:
• Are you a new user? Click here for our guide.
• Are you having problems logging in to this website? Please click here for help. |
|
|
 |
 |
|
|
www.journalofcreditrisk.com |
|
|
|
|
|
View latest issue |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
The Risk Books and Journals group on  is where editors, authors and readers can launch discussions about published and forthcoming books.
Click here to read these discussions and become part of the Risk Books and Journals group. |
|
|
|
|
|
|
