Course Outlines

Credit Courses

Basel IV Credit ratings, pricing and returns Bank Analysis Credit Analysis-Foundation Credit Analysis-Advanced

Counterparty Credit Risk and CVA Workshop

Day One

9:00 – 10:30 Background

• Historical perspective
• Mitigating counterparty risk
• Credit lines
• Models and computation
• Regulation

10:30 – 10:45 Break

10:45 – 12:30 The components of CVA

• Why is CVA so complex?
• Credit exposure
• Default probability
• Recovery rates

12:30 – 13:30 Lunch break

13:30 – 15:15 Credit exposure

• Typical credit exposure profiles
• Simulation methodology for exposure
• Incremental and marginal exposure
• The impact of collateral

Example :i) simulating the exposure for an interest rate swap, ii) calculatingincremental and marginal exposure and calculating exposure with CSAs

15:15 – 15:30 Break

15:30 – 17:00 Credit value adjustment (CVA)

• The CVA of a swap
• CVA formulas
• CVA examples
• Incremental and marginal CVA

Examples : calculating CVA – comparing the standard and approximate formulas.

Examples for different instruments. Calculating incremental CVA.

Day Two

9:00 – 10:30 CVA complexities

• CVA and collateral
• Bilateral CVA (DVA)
• The problems with DVA
• Funding

Examples :Calculating CVA including netting and collateral. Calculating DVA.

10:30 – 10:45 Break

10:45 – 12:30 Wrong way risk

• Evidence and examples of wrong-way risk
• Examples for FX, commodities and options
• Credit derivatives
• Monoline insurers
• Central counterparties

 Examples : Pragmatic wrong way risk approaches

12:30 – 13:30 Lunch break

13:30 – 15:15 Regulatory Capital

• The impact of PFE at the portfolio level
• The alpha factor
• Basel 2 and EEPE definitions
• Basel changes post crisis
• CVA VAR

15:15 – 15:30 Break

15:30 – 17:00 Management of CVA

• Approaches to manage CVA
• Double default
• Dynamic hedging and CVA greeks
• Hedging and DVA
• Hedging in practice