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Counterparty - Credit Module
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The Credit Module provides access to all the counterparty related
information needed to Simulate Credit Risk.
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The Credit Module includes:
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Counterparty Definitions. Name, Country, etc,
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Account Creation: Netting, Account Rating, Collateral, etc.
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Recovery means and Volatilities.
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Country Growth or Contraction.
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Expected default probabilities, Survival Probabilities, Hazard Rates, etc.
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Counterparty Definitions:
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Counterparties are defined for each party against which positions are
traded.
Each counterparty must have at least a valid account defined.
You must assign a Rating and a Country for each counterparty defined. A
Counterparty can also have a lender of last resort that will guarantee the
transaction. In case of default, the guarantor takes over liabilities of the
counterparty.
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Account Creation:
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Accounts are the cornerstones of the credit risk
engine.
Account bind together the trade and the party.
As in real life, Accounts are denominated in different currencies, are either netted or non-netted,
Require collateral postings (dynamic) or a limit. Each account is assigned an
individual recovery.
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Recovery means and Volatilities.
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Recovery means and volatilities are used to compute the recovery value of the
asset once default occurs.
Every user has access to a template that can be modified to fit his exact need.
However only professional status and higher can save these recoveries in
the database for future retrieval and modification.
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Country Growth or Contraction:
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Every user has access to a country template that can be modified and
saved by the user.
Professional status and higher level can
save these recoveries in the database for future retrieval.
Risksvr™ includes the measure of country
risks as an advanced statistic. Country risk is only
available if you have activated credit risk.
During simulation, Risksvr™ simulates
country growth and contraction (or devaluation) from the percentage defined
for each country. A credit rating is also associated to each country against which default probabilities will be
sourced.
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Marginal, Cumulative Default or Survival Probability and
Hazard Rate Converter
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Risksvr™ provides the facility for users to define, import from ASCII or
xml, convert and scale Transition Matrices, hazard rates, marginal conditional,
survival and cumulative default probabilities in order to generate credit curves
for each Rating class involved in the computation of losses..
Advanced users can additionally create their own groups of data which can be
stored in their repository for future reference. .
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