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Contagion Effects and Collateralized Credit Value Adjustments for Credit Default Swaps

Frey, Rüdiger and Rösler, Lars (2013) Contagion Effects and Collateralized Credit Value Adjustments for Credit Default Swaps. Research Report Series / Department of Statistics and Mathematics, 122. WU Vienna University of Economics and Business, Vienna.

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Abstract

The paper is concerned with counterparty credit risk management for credit default swaps in the presence of default contagion. In particular, we study the impact of default contagion on credit value adjustments such as the BCCVA (Bilateral Collateralized Credit Value Adjustment) of Brigo et al. 2012 and on the performance of various collateralization strategies. We use the incomplete-information model of Frey and Schmidt (2012) as vehicle for our analysis. We find that taking contagion effects into account is important for the effectiveness of the strategy and we derive refined collateralization strategies to account for contagion effects. (authors' abstract)

Item Type: Paper
Keywords: counterparty credit risk / bilateral credit value adjustment / contagion / credit default swap / incomplete information / collateralization / Kreditderivat / Ausfallrisiko / Risikomanagement / Kreditrisiko / Swap / Vertragspartei
Classification Codes: RVK QK 660, QK 320
Divisions: Departments > Finance, Accounting and Statistics > Statistics and Mathematics
Depositing User: Josef Leydold
Date Deposited: 31 Jan 2013 09:45
Last Modified: 01 Oct 2013 09:41
URI: http://epub.wu.ac.at/id/eprint/3770

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