This paper proposes an approximate analytical solution method to calculate counterparty credit risk exposures.Compared with the Standard Approach for measuring Counterparty Credit Risk and the Internal Modeling Method...This paper proposes an approximate analytical solution method to calculate counterparty credit risk exposures.Compared with the Standard Approach for measuring Counterparty Credit Risk and the Internal Modeling Method provided by Basel Committee,the proposed method significantly improves the calculation efficiency based on sacrificing a little accuracy.Taking Forward Rate Agreement as an example,this article derives the exact expression for Expected Exposure.By approximating the distribution of Forward Rate Agreement’s future value to a normal distribution,the approximate analytical expression for Potential Future Exposure is derived.Numerical results show that this method is reliable and is robust under different parameters.展开更多
Regime switching,which is described by a Markov chain,is introduced in a Markov copula model.We prove that the marginals（X,H^i）,i = 1,2,3 of the Markov copula model（X,H） are still Markov processes and have marting...Regime switching,which is described by a Markov chain,is introduced in a Markov copula model.We prove that the marginals（X,H^i）,i = 1,2,3 of the Markov copula model（X,H） are still Markov processes and have martingale property.In this proposed model,a pricing formula of credit default swap（CDS） with bilateral counterparty risk is derived.展开更多
基金supported by the National Natural Science Foundation of China under grant 62025306。
文摘This paper proposes an approximate analytical solution method to calculate counterparty credit risk exposures.Compared with the Standard Approach for measuring Counterparty Credit Risk and the Internal Modeling Method provided by Basel Committee,the proposed method significantly improves the calculation efficiency based on sacrificing a little accuracy.Taking Forward Rate Agreement as an example,this article derives the exact expression for Expected Exposure.By approximating the distribution of Forward Rate Agreement’s future value to a normal distribution,the approximate analytical expression for Potential Future Exposure is derived.Numerical results show that this method is reliable and is robust under different parameters.
基金Supported by Jiangsu Government Scholarship for Overseas Studiesthe NNSF of China(Grant Nos.11401419,11301369,11371274)+1 种基金the CPSF(2014M561453)the NSF of Jiangsu Province(Grant Nos.BK20140279,BK20130260)
文摘Regime switching,which is described by a Markov chain,is introduced in a Markov copula model.We prove that the marginals（X,H^i）,i = 1,2,3 of the Markov copula model（X,H） are still Markov processes and have martingale property.In this proposed model,a pricing formula of credit default swap（CDS） with bilateral counterparty risk is derived.
