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Partners in Risk Management

Counterparty Credit Risk

Measuring and managing counterparty credit risk (CCR) and XVA are considered core components of the sound risk management of trading books.

Key Project Experience

  • In order for our client, a G-SIB, to gain regulatory approval to use advanced internal models to calculate their CCR, they required a model to efficiently calculate CCR for their most exotic derivatives. We enhanced an American Monte Carlo model to accurately handle exotic deals, across all asset classes. This involved building a calibration and testing framework, configuring the model to each trade type and testing performance in an automated process. We guided the model through the model validation stage, ultimately building a key component resulting in the bank winning regulatory approval.
  • Banks with active or exotic trading books often see frequent fluctuations in CCR. This can require credit officers to spend significant amounts of time trying to diagnose daily changes. We helped our client, a G-SIB, to build an automated process to systematically attribute changes to various factors. The process was fully integrated with their existing CCR system and covered the entire process from sourcing the data, to carrying out the analysis, and disseminating the results in a web portal. The system was designed to be used by hundreds of credit officers globally, thereby drastically reduce their daily workload.

C: Dilbagh Kalsi
D: +44 (0) 7703 788 016