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Post-conference Seminar
Post-conference seminar
15 October 2010
Credit Models and Counterparty Risk Valuation in Crisis
Damiano Brigo, Gilbart Chair of Financial Mathematics, King's College, London
08:30 Registration and refreshments
09:00 Credit Default Swaps (CDS); CDS Big Bang
09:30 Single name Credit models
• Reduced Form and Intensity
• Deterministic intensity: piecewise constant or linear
• Calibration: CDS's with examples; Parmalat and Lehman
• Hints at Stochastic intensity modeling
10:30 Multi name credit derivatives
• First to default; N-th to default; CDO tranches
• Indices: DJ-i-Traxx and related tranches
• CDOs and the crisis
11:00 Morning break
11:30 Multi name reduced form models and copulas
• Introduction to copula functions; Gaussian copula
• First and n-th to default with copulas
• CDO's with copulas and Factor copulas
• Implied correlation in index tranches. Compound correlation. Base correlation
• Known limits of Copulas and implied correlations pre- and in- crisis
• Inconsistency at single tranche level, inconsistency across the capital
structure, inconsistency across maturities
13:30 Lunch
14:30 Top down Loss models: Hint at GPL model for simultaneous tranche
Calibration across attachments and maturity
15:30 Counterparty risk CVA: Introduction
• Unilateral and Bilateral CVA
• Default modeling
• Exposures
• Impact of volatilities and correlations.
• Subtleties in Wrong way risk profiles.
• Netting and Collateral in CVA calculation
16:30 Afternoon break
17:00 Counterparty risk CVA on Rates, Commodities and Credit
• Interest Rate derivatives: CVA on interest rate swaps
• Commodities: CVA for oil swaps
• Credit Derivatives: CVA on credit default swaps.
• Precise valuation VS Basel II deduced multipliers.
• Example with Lehman, Shell and British Airways
