Review of Equity-Credit Dependence Studies: Towards Building a Practical Equity-Credit Model for Counterparty Risk
53 Pages Posted: 26 Dec 2015
Date Written: December 17, 2015
Abstract
This paper reviews the findings from academia and financial industry from a practical angle, attempting to outline the ‘messages’ which could inform and help the risk community to build practical equity-credit models for counterparty risk. This review covers published material and, where available, information from industry conference presentations and commercial (vendor) offers. We discuss the results taking account of practical implementation constraints. To support the discussion, which for some findings rely strongly on jump detection and simulation, this paper also offers a brief discussion of jump detection methods for counterparty risk modelling.
Keywords: Counterparty risk, Market risk, Cross-Asset, Equity, Credit, PFE, xVA, IMM
JEL Classification: G13, G15, G17
Suggested Citation: Suggested Citation