Hot answers tagged cva
CVA desks are not front office as they have no dealings with external clients. They can be considered "smart middle office" as they are a necessary part of the plumbing to facilitate the core activity of the bank, which is to trade as many derivatives as possible with clients, all of whom have varying levels of credit risk. Essentially, it allows traders in ...
In principle you could say they mainly do risk management on bank level, but also make $ on the way trading out the counterparty risks. Quoting a post in Willmott: "here's how you make profits on a CVA desk. 1) you get paid by an internal desk to cover their c/p risk. you stay long and the credit tightens... you make money (similar to #2 below) 2) Prop ...
Book: Counterparty Credit Risk: The new challenge for global financial markets by Jon Gregory
http://defaultrisk.com/ Main Authors, Papers & Book links, recommendations. Should be all you need.
I recommend the book The Basel II Risk Parameters. This book is primarily a collection of articles on the development, validation and stress testing of the risk parameters. The good thing about this book is that it provides an overview of the methodologies used which should be easy to follow for an experienced credit risk professional. However, it does not ...
Modelling, Pricing, and Hedging Counterparty Credit Exposure: A Technical Guide (Springer Finance)
In some banks the CVA desk is not expected to make profits (or losses). If they are having profit it is because they are overcharging CVA from other internal desks (and hence making those desks less competitive to external clients). If they are making losses it is because they are not pricing correctly the CVA (and therefore not able to buy enough hedges ...
An IRS contract will state in detail what interest is payable to whom and when. The typical vanilla Xibor IRS at present has a CSA for daily-rebalanced cash accruing at OIS rates. So the coupons are fixed on Xibor, and between coupon payments the PV is collateralised with cash, rebalanced every day using OIS interest accrual. However, some old CSAs permit ...
Claudio Albanese has a paper on the topic of GPUs and CVA computations. Here is one of his papers: link to paper
This book is quite good as a starting point: http://www.amazon.co.uk/Counterparty-Credit-Risk-Challenge-Financial/dp/047068576X
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