Counterparty - Credit Module

 

The Credit Module provides access to all the counterparty related information needed to Simulate Credit Risk.

 

The Credit Module includes:

  1. Counterparty Definitions. Name, Country, etc, 
  2. Account Creation: Netting, Account Rating, Collateral, etc.
  3. Recovery means and Volatilities.
  4. Country Growth or Contraction.
  5. Expected default probabilities, Survival Probabilities, Hazard Rates, etc.
 
 

Counterparty Definitions:
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.

 

Account Creation:
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. 

 

Recovery means and Volatilities.
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. 
 
Country Growth or Contraction:

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.

 

Marginal, Cumulative Default or Survival Probability and
 Hazard Rate Converter
 
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. .