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You are very welcome:) All the very best!

Wish I could participate in the student forum, like I used to! Will be back, as soon as I am done with the 'Market risk modelling' EDP

Hi Nicole, Did not know whether it would be ok with you, if I had wished you on the BT website. That is why I wished you in private. Now that others are posting their good wishes publicly, once again - Hearty congrats on getting married - so happy for you:) Jayanthi

Thanks for posting - useful and relevant!

Hi @no_ming, The Credit Substitution approach will lower the PD by hedging the exposure, if and only if the conditional default probability of the guarantor is lower than that of the counterparty. This would mean that the counterparty has a lower credit rating, than the guarantor which has a...

Hi @no_ming, That is a good question. Let us look at what Basel II says about "credit substitution" and "double-default". Suppose the credit risk of an exposure is hedged with a credit default swap or a guarantee from a third party. Under Basel II there are two possible ways to account for...

In addition to the great links that @edmondclchou has given above, you can find the formula's for Exposure, Expected Exposure and Potential Future Exposure on Pages 39-40, Appendix 2A, Chapter 2: Defining Counterparty Credit Risk of Jon Gregory's "Counterparty credit risk" - The new challenge...

Hi @no_ming, The approach traditionally taken by the Basel Committee for handling guarantees and credit derivatives such as credit default swaps is the "credit substitution" approach. Suppose that a AA-rated company guarantees a loan to a BBB-rated company. For the purposes of calculating...

Hi @no_ming, A Credit limit is assigned by an institution to each counterparty. The reason for doing this, is to ensure that the PFE to that counterparty does not breach this limit. As the PFE varies over the life of the transaction, credit limits will also be adjusted upwards or downwards. In...

Hi @no_ming, Expected exposure (EE) is the amount expected to be lost if the counterparty defaults. In other words, the EE will be greater than the Expected MTM, since it concerns only the positive MTM values. Potential Future Exposure (PFE), on the other hand is the worst exposure we could...

An interesting read on how the Global Minimum capital requirements for Home Loans (across EU borders) is not viable: http://www.garp.org/#!/risk-intelligence/detail/a1Z40000003KR25EAG

Preparing for a 2-day intensive workshop on 'Market Risk & Modelling' for Banks - Out of action for 10 days - not well - feeling better now!

Just finished up with a 'Webinar on Basel' - kept it really simple. Ref: Hull RMFI - it was very well received. Well, on to the next :)

Hi @Matthew Graves, Thanks a lot for your explanation. Still not sure I understand it completely....will try a problem to understand:)

Hi David, I am confused about the Capital requirement under the 1996 Amendment: (1) Under the IRB approach, the VAR measure was calculated with a 10-day horizon and a 99% confidence level (2) The Capital requirement was: Max(VARt-1, mc * VARavg) + SRC where VARt-1 = previous day's VAR, VARavg...