Learning objectives: Evaluate the impact of changes in the credit spread and recovery rate assumptions on CVA. Explain how netting can be incorporated into the CVA calculation.
915.1. Strongcore Financial Corporation has purchased a long-term at-the-money (ATM) call option from a...
Learning objectives: Explain the motivation for and the challenges of pricing counterparty risk. Describe credit value adjustment (CVA). Calculate CVA and the CVA spread with no wrong-way risk, netting, or collateralization.
914.1. Your colleague has drafted guidance for your firm's...
Learning objectives: Describe the effectiveness of netting in reducing credit exposure under various scenarios. Describe the mechanics of termination provisions and trade compressions and explain their advantages and disadvantages. Identify and describe termination events and discuss their...
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.
There are two parts to this post.
The first deals with a Practice Question Q 49 from 2018.
The second modifies that to test the concept of multilateral netting.
Q 49. Four derivative counterparties have entered into bilateral netting arrangements. The exhibit below presents a summary of their...
In Gregory chapter 4 there are separate sections for "netting" and "close out netting "
Is there any difference between the 2 as the examples provided for each of them also seems identical
Concept: These on-line quiz questions are not specifically linked to learning objectives, but are instead based on recent sample questions. The difficulty level is a notch, or two notches, easier than bionicturtle.com's typical question such that the intended difficulty level is nearer to an...
Why will the netting benefit be the greatest when a party enters into a trade with positive initial MtM and negative correlation?
Can someone please explain the link between the two?
Thanks a lot in advance.