Stress Testing, Chapter 4: The Evolution of Stress Testing Counterparty Exposures Study Notes contains 14 pages covering the following concepts:
* Differentiate among current exposure, peak exposure, expected exposure, and expected positive exposure.
* Explain the treatment of counterparty credit risk (CCR) both as a credit risk and as a market risk and describe its implications for trading activities and risk management for a financial institution.
* Describe a stress test that can be performed on a loan portfolio and on a derivative portfolio.
* Calculate the stressed expected loss, the stress loss for the loan portfolio and the stress loss on a derivative portfolio.
* Describe a stress test that can be performed on CVA.
* Calculate the stressed CVA and the stress loss on CVA.
* Calculate the debt value adjustment (DVA) and explain how stressing DVA enters into aggregating stress tests of CCR.
* Describe the common pitfalls in stress testing CCR.
After reviewing the notes you will be able to apply what you learned with practice questions & answers.
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