Wrong-way risk (WWR)
Should the ECB stress-test counterparty default risks?
The US Fed already does, but it is notable that EU banks were less exposed to Archegos
Evaluating credit valuation adjustment with wrong-way risk for Bermudan options
The authors propose a method for credit valuation adjustment evaluation that avoids the need for simulation while maintaining efficiency and accuracy.
Leveraged wrong-way risk
A model to assess the exposure to leveraged and collateralised counterparties is presented
Roll up for the BoE’s counterparty mystery tour
Letter warns of cross-currency repo risks, but they didn’t feature in Archegos or LDI blow-ups
ECB zeroes in on wrong-way risk as a key lesson of Archegos
Counterparty risk experts agree with focus on “long-neglected” topic after family office default
Collateralised exposure modelling: bridging the gap risk
Concentration, leverage and correlations may affect a collateralised equity swap portfolio
Podcast: the right way to wrong-way risk and climate risk in XVA
MUFG quant thinks outside the box on risk management
Data-driven wrong-way risk
A calculation method for regulatory CVA wrong-way risk based on credit and exposure is introduced
Major lender hikes borrowing costs as crypto flounders
Brokers warn crypto market faces a reckoning with wrong-way risk as lenders rush to tighten terms
Risk management is not a job for compliance
Credit Suisse losses show why boards require real risk management expertise, says ex-BoE supervisor
A sensitivity analysis of the alpha factor
In this paper, we investigate the alpha factor’s sensitivity to key model parameters under stylized portfolio assumptions in order to better understand its complex characteristics. Our analysis is based on the numerical simulation of alpha sensitivities…
Quantifying systemic risk using Bayesian networks
Creditworthiness of individual entities may offer an insight into systemic risk of financial markets
The homotopy analysis method for derivatives pricing under wrong-way risk
Derivatives pricing is approximated with a computationally efficient homotopy-based application that accounts for WWR
Credit valuation adjustment wrong-way risk in a Gaussian copula model
In this paper, we present an analytical expression for CVA with WWR under the assumption of the lognormally distributed trade value.
Podcast: Gregory and Chung on wrong-way risk modelling
Quants discuss a better way to model wrong-way risk
CVA wrong-way risk: calibration using a quanto CDS basis
Tsz-Kin Chung and Jon Gregory calibrate wrong-way risk with the help of quanto CDS values
Counterparty risk: credit valuation adjustment variability and value-at-risk
This paper proposes an efficient method to obtain the distribution of the CVA at a given risk horizon, from which risk measures such as the CVA VaR can be computed.
Wrong-way risk of interest rate instruments
This paper investigates wrong-way risk effects on the pricing of counterparty credit risk for interest rate instruments.
CVA study highlights scale and causes of wrong-way risk
Researchers advise including correlations both with rate level and volatility in CVA calculations
CVA pricing for commodities with WWR
A calculation of CVA integrating a commodity futures exposure with probability of an event under WWR and credit downgrades
A copula approach to credit valuation adjustment for swaps under wrong-way risk
This paper deals with the credit valuation adjustment (CVA) of interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk (WWR).