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Callable Loan Credit Protection: Wilmott Magazine Article
Alain Verberkmoes and Anna Shepeleva 471 Views

A cancelable LCDS is a credit default swap on loans which is terminated when the underlying reference obligations are refinanced. In this paper we present a simple intuitive approach for dealing with such LCDS contracts. The focus is on the dependence of the issuer's decision to refinance on the issuer's credit spread. The resulting model allows for fast numerical evaluation and can be used for trading and risk management purposes.


A Conditional Valuation Approach for Path-Dependent Instruments: Wilmott Magazine Article
Dante Lomibao and Steven Zhu 1731 Views

In an effort to improve credit risk management, financial institutions have developed various measures to manage their exposure to counterparty risk. One important measure of counterparty risk is potential future exposure (PFE), which is a percentile (typically 95 or 99 percent) of the distribution of exposures at any particular future date.

[First published in issue 24 of Wilmott - July 2006]

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