Resources

Margining and Collateral as CCR Mitigation Tools

We present the review of margining as a Counterparty Credit Risk mitigation tool in OTC derivative trading, based on International Swap and Derivative Association standards. Practical part of the paper studies the impact of margining thresholds, independent amounts and timing parameters on the portfolio exposure.

Netting Effects in Counterparty Credit Risk Modeling

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The paper discusses advantages of using netting as part of derivative portfolio management, overviews netting types and specifics of its practical application by the financial institutions, and provides practical guidelines on calculating netted exposures. The paper also includes examples of netting benefit calculation and exposure simulation results from PrevioRisk, the platform-independent solution for effective counterparty credit risk management.

Basel Capital Requirements for Portfolio of Derivatives

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The paper provides practical guidelines on estimation of Exposure at Default, based on the methods proposed in Basel 2 and 3, and compares the capital charge imposed under different methods (Current Exposure Method, Standardized Method, Internal Model Method, and the recently proposed Non-Internal Model Method), using calculations performed for a portfolio of derivatives in PrevioRisk software. We explain the step-by-step process of CCR capital charge computation and discuss the advantages and limitations of mentioned methods in practical use.

Using Trading Limits for Portfolio Management

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This note provides an analytical algorithm for computing expected structure of trading portfolio under the given set of limits. While helping to determine potentially unutilized limits and portfolio bottlenecks, the discussed approach encourages effective portfolio management.
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Contagion Based Early Warning System

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The paper is the first attempt to construct an early warning system based on financial contagion using copula functions methodology. Estimations are based on time series of daily return rates for eleven largest regional financial markets in 1996-2010 and cover major crises of 1998, 2004 and 2008.
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