Modelling Pricing and Hedging Counterparty Credit Exposure (WYSYŁKA KURIEREM GRATIS!)

Building an accurate representation of firm-wide credit exposure, used for both trading and risk management, raises significant theoretical and technical challenges. This volume can be considered as a roadmap to finding practical solutions to the problem of modelling, pricing, and hedging counterparty credit exposure for large portfolios of both vanilla and exotic derivatives, usually traded by large Investment Banks. It is divided into four parts, (I) Methodology, (II) Architecture and Implementation, (III) Products, and (IV) Hedging and Managing Counterparty Risk. Starting from a generic modelling and valuation framework based on American Monte Carlo techniques, it presents a software architecture, which, with its modular design, allows the computation of credit exposure in a portfolio-aggregated and scenario-consistent way. An essential part of the design is the definition of a programming language, which allows trade representation based on dynamic modelling features. Several chapters are then devoted to the analysis of credit exposure across all asset classes, namely foreign exchange, interest rate, credit derivatives and equity. Finally it considers how to mitigate and hedge counterparty exposure. The crucial question of dynamic hedging is addressed by constructing a hybrid product, the Contingent-Credit Default Swap. This volume addresses, from a quantitative perspective, recent developments related to counterparty credit exposure computation. Its unique characteristic is the combination of a rigorous but simple mathematical approach with a practical view of the financial problem at hand.Roadmap to finding practical solutions to the problem of computing counterparty credit exposure for large books of both vanilla and exotic derivatives usually traded by large Investment BanksCombines a rigorous but simple mathematical approach with a practical view of the financial problem at hand