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

Chorniy, Vladimir and Greenberg, Andrei, Review of Equity-Credit Dependence Studies: Towards Building a Practical Equity-Credit Model for Counterparty Risk (December 17, 2015). Available at SSRN: https://ssrn.com/abstract=2708143 or http://dx.doi.org/10.2139/ssrn.2708143

Vladimir Chorniy (Contact Author)

BNP Paribas, London ( email )

10 Harewood Avenue
London, NW1 6AA
United Kingdom

Andrei Greenberg

BNP Paribas, London ( email )

10 Harewood Avenue
London, NW1 6AA
United Kingdom

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