In this article, we discuss the calibration of wrong way risk (WWR) model by using information from the credit default swap (CDS) market. A Quanto CDS provides credit protection against the default of a reference entity but is denominated in a non-domestic currency. The payoff of a Quanto CDS...

Since the global financial crisis, two significant regulatory initiatives have been introduced in the form of the central clearing mandate and bilateral margin requirements. A major implication of these initiatives is the need for major players in the OTC derivative market to post collateral, in...

When considering counterparty credit risk, it has become increasingly common in recent years for institutions to consider bilateral CVA which includes debt value adjustment (DVA) linked to their own default probability. However, the use of DVA is contentious as it is not obvious that an...

Monoline insurers act as triple-A guarantors of the rather senior risks in structured finance. The purchaser of credit insurance or protection from a monoline may argue that they take only a small amount of counterparty risk which is a common side-effect of trading OTC derivatives products....

Leveraged super senior (LSS) trades represent a mechanism for packaging senior credit risk. A significant volume of LSS structures have been issued to date and yet there seems to be no formal pricing approach. In this article we discuss the valuation of LSS protection in a model independent...

The growth of the structured credit market gave rise to many complex collateralised debt obligation (CDO) structures and, prior to the beginning of the global financial crisis in 2007, the CDO was seen as a successful financial innovation. However, CDOs have since been blamed for partly causing...