The global credit crisis has brought on an increased focus on counterparty credit risk (CCR), emerging as one of the most important issues in today’s financial markets. Understanding derivatives and their respective cash flows is the starting point of identifying credit exposure faced by counterparties. This course is designed to empower participants to identify, quantify, understand and mitigate counterparty credit risk arising from derivatives across the major asset classes. An intuitive non-quantitative approach will be employed throughout so that participants develop a feel for risk/reward tradeoffs without relying on complex mathematical formulas.
Course Objectives
By the end of the course, participants will be able to:
- Explain how counterparty credit risk arises and why measuring it is difficult
- Describe how counterparty credit risk may be mitigated through netting and collateralization
- Construct and interpret measures of counterparty risk for derivative securities
- Show how netting and collateral affect exposure
- Calculate and interpret Credit Value Adjustment (CVA) and other counterparty risk prices
- Discuss the problems posed by wrong-way risk
- Interpret and apply regulatory requirements related to counterparty risk, including the Basel III CVA charge
Suggested Prerequisites:
- Fundamental of theCapital Markets / Securities Industry
- Derivatives or equivalent knowledge
Program Level: Intermediate
Advance Preparation: None
Computers and Financial Calculators: N/A
Recommended CPE Credits: 7