Documentation dilemmas

Concerns over credit event definitions and the Basel Committee’s ‘ w ’ capital charge on credit mitigation instruments will not be easily resolved.

The credit derivatives market is unexpectedly at a crossroads. The burgeoning volumes of default swap and structured transactions over the past two years drew attention away from potential problems embedded in the default swap documentation. But the recent decline in corporate credit quality has now brought these to light. Dealers are beginning to realise that this is still a new market, and its teething pains are far from over.

Protection buyers, sellers and intermediaries now find

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Credit risk & modelling – Special report 2021

This Risk special report provides an insight on the challenges facing banks in measuring and mitigating credit risk in the current environment, and the strategies they are deploying to adapt to a more stringent regulatory approach.

The wild world of credit models

The Covid-19 pandemic has induced a kind of schizophrenia in loan-loss models. When the pandemic hit, banks overprovisioned for credit losses on the assumption that the economy would head south. But when government stimulus packages put wads of cash in…

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