Trésorier/Treasurer magazine - N°88 - Jan/Fev/Mar 2015 - (Page 53)

The Risk Observatory by Hugues Pirotte (FinMetrics) Hugues Pirotte Credit Counterparty Risk (CCR) The Risk Observatory by Hugues Pirotte (FinMetrics) [Technical report] / FEB / MAR 2015 [Technical report] LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE - N°88 - JAN Evolution is in general the result of the boom, some building on ideas deveBut, the interest in tackling precisely Credit C loped in 1974 by Robert Merton conjunction of several factors, rarely only ounterparty Risk (CCR) around that risk was limited. Exchange-traded one. End of August 1981, the 3-month the optional concept. But still, credit derivatives were arely only o through Evolution is in general the result of the conjunction of several factors, rcollateralisedne. End of August US T-Bill rate was quoted at 15.52%. the 3--‐month US T--‐Bill seen asas quoted at by risk was mainly rate w the one born 15.52%. Between 1986 OTC 1995, almost one third of margin calls and and derivatives were 1981, Between 1986 and 1995, almost one third lenders because of the potential default either (1) limited to investment-grade of all US savings and loans wereall US savings and loans were closed investor holds the FDIC and the RTC. Interest--‐rate structure closed of borrowers. Typically, an or resolved by counterparties, (2) negotiated in a way or resolved by the FDIC and thechanges, Ponzi schemes and curve that bond can RTC. a bond and the issuer of plays were highlighted the the key ingredients of that crisis. The that as advantage of the trade was more Interest-rate structure changes, Ponzi and volatility of contrast,rcounterparty credit a sbeneficial to the better-rated counterpart default. In interest ate of the 80's gave trong incentive to academics in mathematical height schemes and curve plays were highlighrisk doesn't arise because of the instruor (3) linked to the portfolio of activities ted as the key ingredients of finance to devote substantial efforts to model the term structure of interest--‐rates and its evolution. of the bank with its that crisis. The height and client. is was typical Ratings Thand related credit volatility of interest rate of for interest-rate swaps. spreads were comparatively the 80's gave a strong inBut competition, globaquite stable and seen as a centive to academics in malisation, the evolution of thematical finance to devote quantitative techniques, single add--‐on to be added to substantial efforts to model the capacity to moniany discount rate. Thus, credit the term structure of intetor information, news risk was an input that, for blue rest-rates and its evolution. and calculations in real Ratings and related credit time, was a creation of chips, and the small fraction to spreads were comparatively credit derivatives altobe added on top of the risk--‐ quite stable and seen as a gether changed the offer free rate and that bore almost single add-on to any disand demand of credit count rate. Thus, credit risk risk competences. Th now that no uncertainty. But e was an input that, for blue Basle Accord is a good risk--‐free rates are almost null chips, was a small fraction reflection of that. Basle I with provided a standard term to be added on top of the (88) a pretty flat risk-free rate and that bore model consisting in the structure, credit spreads and their volatility have gained interest. In the mid 90's, the research on almost no uncertainty. But now that risk- ment itself but because of the potential application of weighting tables. Basle credit risk started to boom, some building on ideas developed in 1974 by Robert Merton aII round the free rates are almost null with a pretty flat default of any of the parties exchanging in 2004 (but started in 1999) allowed for optional term structure, credit spreads and their concept. But still, for example was mainly seen as the one born by lenders because of the an instrument, credit risk a derivative. internal models of banks to be used. volatility have gained interest. In the mid default of borrowers. Typically, to that potential In the 90's, derivatives subject an investor holds a bond and the issuer of that bond can 90's, the research on credit risk started to risk were called "vulnerable derivatives". default. In contrast, counterparty credit risk doesn't arise because of the instrument itself but because of the potential default of any of the parties exchanging an instrument, for example a derivative. In the 90's, derivatives subject to that risk were called "vulnerable derivatives". But, the 53 interest in tackling precisely that risk was limited. Exchange--‐traded derivatives were collateralised --‐

Table des matières de la publication Trésorier/Treasurer magazine - N°88 - Jan/Fev/Mar 2015

Cover
Table of contents
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW From Legal Entity Management to Bank Account Management - LVMH case study
FOCUS
Treasurers, do you have any BEPS?
Reguvolution
7 Ways to impress your CFO boss starting now
FORUM
How to do more with less
Repo made easy
Comment combiner rendement, liquidité et gestion des risques pour sa trésorerie : l'exemple français
Les stratégies d'Alpha, à la rescousse d'un environnement de taux faibles
CORPORATE FINANCE
The benefits of collateral for the corporate treasurer
Les états financiers dans le cadre d'EMIR - que réserve l'avenir?
VAT changes as from 2015: new reimbursement procedure of VAT credit
Investissement des entreprises - une nouvelle ère pour la trésorerie
15 MINUTES AVEC USG Finance Professionals
THE RISK OBSERVATORY
NEWS
LIFE BEYOND NUMBERS

Trésorier/Treasurer magazine - N°88 - Jan/Fev/Mar 2015