CEU Electronic Theses and Dissertations, 2018
| Author | Tulegenov, Kairat |
|---|---|
| Title | Credit Valuation Adjustment Wrong Way Risk: Comparison of Hull-White's Wrong Way Risk Model with the Ruiz et al.'s Model |
| Summary | In this paper, the performance of two credit valuation adjustment (CVA) wrong way risk models were compared: Hull-White wrong way risk and Ruiz et al.'s model. In addition, performance of the models were compared to no wrong way risk credit valuation adjustment model. To capture high correlation between exposure and probability of default of the counterparty Russian Financial Crisis period (2014-2017) is considered in calibration of these two models. The effect of CVA wrong way risk was considered on cross currency swap with four up to ten year maturities. For Ruiz et al.'s model exchange rate is taken as a market factor which drives positive correlation between hazard rate and exposure. On the stressed calibration of these two models Hull-White wrong way risk model always outperform Ruiz et al.'s model. Hull-White wrong way risk model shows higher CVA values as it captures indirectly positive correlation between exposure and probability of default through other market factors. |
| Supervisor | Zawadowski, Adam Gabor |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2018/tulegenov_kairat.pdf |
Visit the CEU Library.
© 2007-2021, Central European University