Counterparty credit risk: Difference between revisions
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credit risk, replacing previously sanctioned methods. | credit risk, replacing previously sanctioned methods. | ||
Interesting thing I didn’t know until today was that only ⅓ of all losses suffered in the global financial crisis came from actual counterparty defaults. Two-thirds came from [[credit value | Interesting thing I didn’t know until today was that only ⅓ of all losses suffered in the global financial crisis came from actual counterparty defaults. Two-thirds came from [[credit value adjustment]]s arising from the credit deterioration, but not outright failure, of derivative counterparties. | ||
{{sa}} | {{sa}} | ||
*[[Credit value adjustment]]s | *[[Credit value adjustment]]s | ||
Latest revision as of 17:37, 15 January 2024
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Regulatory Capital Anatomy™
The JC’s untutored thoughts on how bank capital works.
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Counterparty credit risk
/ˈkaʊntəˈpɑːti/ /ˈkrɛdɪt/ /rɪsk/ (n.)
(Also CCR) No, not Creedence Clearwater Revival. But, in the minds of a credit officer, something almost as hallowed: the risk that the counterparty to a transaction could default before finally settling all payments it owes under the transaction.
An important component of Basel regulation since at least Basel II, by late stage Basel III and Basel IV, it had become “SA-CCR”, the standardised approach to calculating counterparty credit risk, replacing previously sanctioned methods.
Interesting thing I didn’t know until today was that only ⅓ of all losses suffered in the global financial crisis came from actual counterparty defaults. Two-thirds came from credit value adjustments arising from the credit deterioration, but not outright failure, of derivative counterparties.