Measurement and Management of Counterparty Risk

The measurement and management of counterparty risk is a rapidly evolving area. A range of new regulatory requirements is changing the way in which institutions view risk. This affects not only risk quantification but the whole commercial model of an institution. Against a backdrop of a discipline in constant evolution, this whitepaper explores some of the key areas associated with the management and measurement of counterparty risk. Some of the topics explored in the white paper include:

• Limit setting, including the policy choices that banks need to make when establishing their limit framework
• Methodology, data and technology challenges that banks face in measuring and managing PFE and CVA
• Evolution of regulatory risk capital calculation for counterparty risk and the CVA risk charge
• Trends in the management of counterparty risk such as the establishment of a central CVA desk