This chapter describes a method to include the correlation between different positions within a netting group at the first stage and between netting groups at a second stage. A change in the value of a derivative might impact the value of other derivatives with this counterparty. This effect can be properly captured on a netting group level, as we cannot net positions from different netting groups. Therefore, the next sections explain how to include the correlation into the future net replacement value and the credit loss…
Correlation-Driven Issues
Giuseppe Orlando
;
2022-01-01
Abstract
This chapter describes a method to include the correlation between different positions within a netting group at the first stage and between netting groups at a second stage. A change in the value of a derivative might impact the value of other derivatives with this counterparty. This effect can be properly captured on a netting group level, as we cannot net positions from different netting groups. Therefore, the next sections explain how to include the correlation into the future net replacement value and the credit loss…File in questo prodotto:
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