What is EPE in Basel?

What is EPE in Basel?

Effective Expected Positive Exposure (EPE) with stressed parameters. 2. To determine the counterparty credit risk capital charge as defined in the. Basel III document, para 99 – inserting para 105 in Annex 4 of the Basel. framework, banks must use as the default risk capital charge the greater of.

What is incurred CVA?

Incurred CVA is an accounting value adjustment that helps to ensure that the asset value and the capital of a firm are appropriately reduced to reflect the expected losses as a result of a counterparty’s credit quality.

How is CVA calculated?

CVA is calculated as the difference between the risk free value and the true risk-adjusted value. In most cases, CVA reduces the mark-to-market value of an asset or a liability by the CVA’s amount.

What is SA CCR?

The Standardized approach for counterparty credit risk (SA-CCR) is the capital requirement framework under Basel III addressing counterparty risk. SA-CCR calculates the exposure at default of derivatives and “long-settlement transactions” exposed to counterparty credit risk.

What is peak exposure?

(peek ek-SPOH-zher) The largest amount of a substance or radiation that a person is exposed to at one time. Peak exposure to a harmful substance or radiation may increase the risk of certain diseases or conditions.

What is the purpose of CVA?

Credit Valuation Adjustment (CVA) is the price that an investor would pay to hedge the counterparty credit risk of a derivative instrument. They are complex financial instruments that are. It reduces the mark to market value of an asset by the value of the CVA.

What is CVA in banking?

Credit valuation adjustment is a change to the market value of derivative instruments to account for counterparty credit risk. It represents the discount to the standard derivative value that a buyer would offer after taking into account the possibility of a counterparty’s default.

What does CVA mean in banking?

Credit valuation adjustment
Credit valuation adjustment is a change to the market value of derivative instruments to account for counterparty credit risk. It represents the discount to the standard derivative value that a buyer would offer after taking into account the possibility of a counterparty’s default.

What is FRTB regulation?

The Fundamental Review of the Trading Book (FRTB) is a comprehensive suite of capital rules developed by the Basel Committee on Banking Supervision (BCBS) as part of Basel III, intended to be applied to banks’ wholesale trading activities.

What is Unsegregated collateral?

unsegregated collateral means collateral that— (a) is posted by an authorized institution or another person, as the case may be, for— (i) its transaction that is cleared by a CCP; or. (ii) a bilateral transaction entered into by the institution or the person with a. counterparty; and.

What is effective exposure?

The effective exposure of a Portfolio which is achieved through a derivative position reflects the equivalent amount of the underlying security that would provide the same profit or loss as the derivative position, given an incremental change in the price of the underlying security.

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