Linear, yet attractive, Contour
Banks’ Potential Future Exposure models are at the core of the advanced EAD (Exposure At Default) approach to capital requirements for credit risk considered in the New Basel Capital Accord. Juan Cárdenas , Emmanuel Fruchard and Jean-François Picron look at a method to quickly and accurately estimate Potential Future Exposure on portfolios of OTC derivatives dealt with a single counterparty with whom netting applies.
However netting progressively applied in most countries where this trading takes place, and the complexity of the
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