Using credit valuation adjustment to set limits
Credit valuation adjustment for energy and commodity derivatives: part two
When two entities enter into a series of transactions, they also exchange an implicit option to default. Credit valuation adjustment (CVA) is the price or cost of credit risk for a deal or portfolio with a given counterparty.
CVA can be calculated at the individual transaction level or for each counterparty portfolio. The overall CVA for the exposures with a given counterparty is not simply the sum of the CVAs for individual deals, because of the need to take into account credit risk mitigation
More on Risk management
Energy Risk at 30: Learning from the past
Energy Risk looks back at the seminal events and developments that have shaped today’s energy markets
Past disasters can prove the value of energy risk management
Analysing failures and losses at energy firms can underscore the value of consistent, high-quality risk management
How quants shaped the modern energy markets
The business models of today’s utility firms are built on quantitative analysis, but the introduction of these techniques in the 1990s was far from smooth
Interview: Vince Kaminski
Market veteran Vince Kaminski discusses the biggest risks to energy firms today and whether risk teams can ever prove their value
Mounting risk prompts refocus on integrated energy risk management
Energy firms are facing heightened risk due to shifting geopolitics, climate change and the energy transition. As market, credit and enterprise risks ramp up, the need for improved integrated risk management is growing, say risk managers
Energy supply chains seen as a growing risk
Supply chain risk is now a major concern, with some firms even viewing it as an existential threat, survey finds
Can behavioural science curb rogue traders… and compliance costs?
Instead of using surveillance to catch endless bad apples, experts urge banks to clean the barrel
Former regulator urges new approach to AI explainability
Ex-OCC chief Michael Hsu suggests shift from academic analysis to decision-based techniques
