This paper deals with the effects of concentration (single name and sectoral) and contagion risk on credit portfolios. Results are obtained for the value at risk of the portfolio loss distribution, in the analytical framework originally developed by Vasicek in 1991 [1]. VAR is expressed as a sum...

This paper deals with the effects of concentration (single name and sectoral) and contagion risk on credit portfolios. Results are obtained for the Value at Risk (VaR) of the portfolio loss distribution, in the analytical framework originally developed by Vasicek in 1991. VaR is expressed as a...

A timely guide to understanding and implementing credit derivatives Credit derivatives are here to stay and will continue to play a role in finance in the future. But what will that role be? What issues and challenges should be addressed? And what lessons can be learned from the credit mess?...

In this paper we focus on a fundamental practical issue regarding the bilateral counterparty risk adjustment. The past literature assumes that, at the moment of the first default, a risk-free closeout amount will be used. The closeout amount is the net present value of the residual deal which is...

We introduce an innovative theoretical framework for the valuation and replication of derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit Valuation Adjustments (CVA and...

We present a dialogue on Counterparty Credit Risk touching on Credit Value at Risk (Credit VaR), Potential Future Exposure (PFE), Expected Exposure (EE), Expected Positive Exposure (EPE), Credit Valuation Adjustment (CVA), Debit Valuation Adjustment (DVA), DVA Hedging, Closeout conventions,...

We introduce an innovative theoretical framework for the valuation and replication of derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on credit and debit valuation adjustments (CVA and...