Pricing Counterparty Risk at the Trade Level and CVA Allocations

《Pricing Counterparty Risk at the Trade Level and CVA Allocations》由会员上传分享，免费在线阅读，更多相关内容在学术论文-天天文库。

1、FinanceandEconomicsDiscussionSeriesDivisionsofResearch&StatisticsandMonetaryAffairsFederalReserveBoard,Washington,D.C.PricingCounterpartyRiskattheTradeLevelandCVAAllocationsMichaelPykhtinandDanRosen2010-10NOTE:StaffworkingpapersintheFinanceandEconomicsDiscussionSeries(FEDS)areprelimin

2、arymaterialscirculatedtostimulatediscussionandcriticalcomment.TheanalysisandconclusionssetfortharethoseoftheauthorsanddonotindicateconcurrencebyothermembersoftheresearchstaffortheBoardofGovernors.ReferencesinpublicationstotheFinanceandEconomicsDiscussionSeries(otherthanacknowledgemen

3、t)shouldbeclearedwiththeauthor(s)toprotectthetentativecharacterofthesepapers.1PricingCounterpartyRiskattheTradeLevelandCVAAllocations23MichaelPykhtinandDanRosenNovember2009AbstractWeaddresstheproblemofallocatingthecounterparty-levelcreditvaluationadjustment(CVA)totheindividualtrades

4、composingtheportfolio.Weshowthatthisproblemcanbereducedtocalculatingcontributionsofthetradestothecounterparty-levelexpectedexposure(EE)conditionalonthecounterparty’sdefault.WeproposeamethodologyforcalculatingconditionalEEcontributionsforbothcollateralizedandnon-collateralizedcounter

5、parties.CalculationofEEcontributionscanbeeasilyincorporatedintoexposuresimulationprocessesthatalreadyexistinafinancialinstitution.Wealsoderiveclosed-formexpressionsforEEcontributionsundertheassumptionthattradevaluesarenormallydistributed.Analyticalresultsareobtainedforthecasewhenthe

6、tradevaluesandthecounterparty’screditqualityareindependentaswellaswhenthereisadependencebetweenthem(wrong-wayrisk).1Theopinionsexpressedherearethoseoftheauthorsanddonotnecessarilyreflecttheviewsorpoliciesoftheiremployers.2FederalReserveBoard,Washington,DC,USA.michael.v.pykhtin@frb.g

7、ov.32RFinancialTechnologiesandTheFieldsInstituteforResearchinMathematicalSciences,Toronto,Canada.dan.rosen@R2-financial.comanddrosen@fields.utoronto.ca11.IntroductionForyears,thestandardpracticeintheindustrywastomarkderivativesportfoliostomarketwithouttakingthecounterpartycreditqual

8、ityintoaccount.Inth