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  1. Nicole Seaman

    P2.T6.903. The International Swaps and Derivatives Association (ISDA) Master Agreement (Gregory Ch.4)

    Learning objectives: Explain the purpose of an ISDA master agreement. Summarize netting and close-out procedures (including multilateral netting), explain their advantages and disadvantages, and describe how they fit into the framework of the ISDA master agreement. Questions: 903.1. Becky's...
  2. Nicole Seaman

    P2.T6.902. xVA components (Gregory Ch.4)

    Learning objectives: Identify and describe the different ways institutions can quantify, manage and mitigate counterparty risk. Identify and explain the costs of an OTC derivative. Explain the components of the xVA term. Questions: 902.1. Patricia is a Risk Analyst working on a counterparty...
  3. Nicole Seaman

    P2.T6.901. Credit exposure and valuation adjustments (Gregory, Ch.4)

    Learning objectives: Describe credit exposure, credit migration, recovery, mark-to-market, replacement cost, default probability, loss given default, and the recovery rate. Describe credit value adjustment (CVA) and compare the use of CVA and credit limits in evaluating and mitigating...
  4. K

    Netting factor

    Hi, Page 65, R46.P2.T6. Gregory Notes it says that the netting factor is given by: netting factor = NF = sqrt(n + n*(n-1)*rho-bar)/n While I see that if rho-bar = 1 (no netting benefit) then NF = 100% and of rho-bar=0, then NF = 1/ sqrt (n), I do not see how NF can be 0% with perfect...
  5. Arka Bose

    Credit curve and CVA

    I was reading Gregory and there he mentions that 'in upward sloping curve, defaults are back loaded and in case of downward sloping curve, defaults are front loaded. What does this mean?
  6. K


    Why is higher recovery rate means higher implied prob. Of default? And if that is the case then changes to CVA will be net of increase in probability ofdefault and decrease in loss amount.. So will the final CVA lesser if the recovery amount is increased? Thanks Kavita
  7. Nicole Seaman

    P1.T3.604. Impact of central clearing (Gregory)

    Learning objectives: Compare margin requirements in centrally cleared and bilateral markets, and explain how margin can mitigate risk. Compare and contrast bilateral markets to the use of novation and netting. Assess the impact of central clearing on the broader financial markets. Questions...
  8. Nicole Seaman

    P1.T3.603. Basic principles of central clearing (Gregory)

    Learning objectives: Provide examples of the mechanics of a central counterparty (CCP). Describe advantages and disadvantages of central clearing of OTC derivatives. Questions: 603.1. Which is TRUE of clearing? a. By definition, clearing is central b. Clearing occurs between execution and...
  9. Nicole Seaman

    P1.T3.602. Over the counter (OTC) derivatives (Gregory)

    Learning objectives: Identify the classes of derivatives securities and explain the risk associated with them. Identify risks associated with OTC markets and explain how these risks can be mitigated. Questions: 602.1. Which OTC derivatives class has the largest amount of gross notional...
  10. Nicole Seaman

    P1.T3.601. The Need to Clear Derivatives (Gregory)

    Learning objectives: Describe how exchanges can be used to alleviate counterparty risk. Explain the developments in clearing that reduce risk. Compare exchange-traded and OTC markets and describe their uses. Questions: 601.1. An exchange is a central financial center where parties can trade...
  11. Nicole Seaman

    P1.T3.600. Central clearing (Gregory)

    Learning objectives: Explain the characteristics of bilateral OTC derivatives trading and the role they may have played in the recent financial crisis. Identify the regulatory changes implemented after the financial crisis. Describe the basic characteristics of central clearing and central...
  12. Nicole Seaman

    P2.T6.600. Functions of central counterparties (CCPs) (Gregory)

    Learning objectives: Explain the objectives and functions of central counterparties (CCPs). Discuss the strengths and weaknesses of CCPs. Questions: 600.1. Which of the following is TRUE about a central counterparty (CCP)? a. The central counterparty (CCP) mitigates market risk by a process...