1. OTC COLLATERALIZATION, CVA AND FVA
The practical challenges of untangling
credit and funding costs
Alexandre Bon
RI$KMINDS 2011
Geneva
December the 8th

2. Where have all the flowers gone?
« Too big to fail » have become « too big to save »
Massive re-regulation & changing standards
– Basel III, Dodd Frank-Emir, IFRS 13…
Where is the risk-free asset ?
– OIS-LIBOR basis
– Multi-curve environment
– Risky sovereigns
What about the « Law of One Price? »
– Valuation adjustments
– Close-out value vs. Profitability measure
Evolving business models
– CCPs, CVA desks, Collateral transformation…
Copyright ® 2011 Murex S.A.S. All rights reserved 2

3. Introducing the Collateral Agreement
A bit of terminology : Collateral, ISDA & CSA
– CSA : credit support annex
– Non-mandatory appendix to the ISDA master agreement (which enforces close-
out netting for eligible contracts)
– Defines the scope and terms of bilateral remargining agreement
– CSA is the most common (but not the sole) collateral agreement for OTC
derivatives
– Standard templates but varied implementations (differences in clauses and
jurisdictions)
Main clauses
– Eligibility of positions to close-out netting and collateralization
– Eligibility of pledge-able assets and applicable haircuts
– Remargining process : valuation, frequency, settlement, reconciliation, dispute
resolution
– Determination of the collateral balance: symmetry, thresholds, independent
amounts, minimum transfer amounts, rounding rules…
– Legal framework: pledge or title-transfer, rights of re-use & rehypothecation
– Remuneration of the collateral account (most often based on an OIS rate, but
not always!)
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4. Collateral Mitigation
Collateralization does not fully eliminate counterparty
risk but reduces it greatly.
A collateral contract can be seen as a derivatives
contract of the portfolio value.
Collateral pay-off function :
– Risk-free value of the collateralized portfolio at the re-margining date
– Thresholds, Minimum Transfer Amount, Independent amounts, rounding
rules
– Outstanding balance
– Haircuts applicable to the collateral asset
Copyright ® 2011 Murex S.A.S. All rights reserved 4

5. CVA - Collateral Modeling
Margining
Counterparties Netting Nodes
Nodes
Eligibility rules
CSA
Exposures are
ISDA - ABC
mapped to Netting
and Margining sets No collateral
Upon close-out the
Bank ABC
collateral balance GMRA GMRA
is offset against
the netting node
positions
No netting No collateral
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6. CVA - Collateral Modeling
Exposure at t is the difference of the Close-Out value of the portfolio
and Outstanding collateral balance
Considering the simulation date correspond to the close-out date
following default one identify the previous effective re-margining date
Common modeling options
Margin Period of Risk
previous grace
dispute fail close-out
remargining period
Unsecured exposure
(collateralised set)
Exposure
Collateral Balance Threshold
Simulation Simulation
Ti - MPR
date Ti-1 date Ti
Copyright ® 2011 Murex S.A.S. All rights reserved 6

7. CVA - Collateral Modeling
A path-dependent issue
Common modeling options:
– Short-cut method
– Dynamically identify the previous margining date and revalue (only) the
collateralized set’s positions by full simulation
– Analytical (portfolio volatility) approximations
– Pros/Cons
Margin Period of Risk
Exposure
Threshold
Simulation Simulation
Ti - MPR
date Ti-1 date Ti
Copyright ® 2011 Murex S.A.S. All rights reserved 7

8. Collateralization & typical portfolio mix
An institution’s OTC portfolio will commonly contain a mix of:
– Bilateral CSAs with 0 threshold and daily margining (cash)
– Positions cleared on CCPs : daily or intraday exchange of Variation and
Initial Margin
– CSAs with asymmetric terms
• One-way with SSAs
• Over-collateralized agreements (IAs, Thresholds, IM) and security collateral (e.g.
PB agreements) : small funds and corporates
– No CSA
– Multiple “collateral sets” with a single credit entity (by products : CSA,
GMRA, OSLA, GMSLA … or entities)
Some local variations, but the interbank market is mostly on
bilateral CSAs and daily cash margining
Imperfect collateralization bears additional risks & and
warrants further valuation adjustments (credit and funding)
Copyright ® 2011 Murex S.A.S. All rights reserved 8

9. CVA – Collateralization Efficiency
Main collateralization risks and issues:
Lack of standardization across CSAs
Costs and risks of operation (bilateral & 0-threshold)
Concentration risk
Credit dependent clauses
Eligibility of collateral assets & haircuts
Execution : rounding, split differences, disputes
– In practice collateral amount will never exactly match the exposure
levels
– The former are typically ignored in the model, the latter managed by
adjusting the MPR of problem counterparties (dispute history).
Rehypothecation and re-characterization risks
Gap Risk
– Model risk & close-out value
– JTD & Wrong way risk
Copyright ® 2011 Murex S.A.S. All rights reserved 9

10. Rehypothecation
Rehypothecation:
– The collateral taker uses pledged assets as security for his own obligations to a third
party
Right of re-use:
– Covers rehypothecation as well as any use of the collateral asset in line with
ownership of the property (e.g. sale, lending to a third party)
Depending on the jurisdictions and legal phrasing, collateral
exchange can be performed under:
– A Title Transfer Arrangement (implicit re-use rights)
– A Pledged Collateral Agreement, where the rehypothecation right may be explicitely
granted (often the case with non-bank counterparties)
Similar question with cash collateral and margin segregation
Some remarks:
– Rehypothecation and “re-pledging chains” have played an essential part in providing
liquidity (and leverage) to the financial markets
– The GFC showed how damaging the combined effects of reduced collateral velocity
(cf. Lehman close-out) and collateral squeeze (haircuts) can be in a systemic shock.
– Not a desirable feature from a CCR mitigation point of view, but forfeiting this right
represents a funding cost.
Copyright ® 2011 Murex S.A.S. All rights reserved 10

11. Risk-free or risky close-out
ISDA documentation not 100% clear on how we
should price the liquidation value of derivatives.
Open issue for default close-out as well as
valuations for Unwinds and ATEs
Introduces a recursive pricing issue
Theoretical justifications for both approaches: the
need for another Valuation Adjustment
(RVA/ATEVA) ?
Practical questions:
– Pricing of DVA or funding cost in distressed markets
– Joint-default
– Going-concern collateral balance is determined based on risk-free
valuation
Copyright ® 2011 Murex S.A.S. All rights reserved 11

12. One-Way Collateral Agreements
Part I
Sovereigns, Supranationals and Agencies (SSAs)
Small non-bank counterparties without a collateral
management function
Potentially large exposures for the un-collateralized
party
Bilateral CVA ~ Unilateral CVA
Exposures vs. Liabilities
distributions
Copyright ® 2011 Murex S.A.S. All rights reserved 12

13. Collateral gap risk
Instantaneous jump in exposure and counterparty default
leaving a portion of the portfolio un-collateralized
• More prevalent with imperfect CSAs
(large thresholds & MTAs, longer remargining frequencies)
• Credit protection bought from related entity
• Simply settlement effects (warrant special treatment?)
• Liquidity effects upon counterparty default
Copyright ® 2011 Murex S.A.S. All rights reserved 13

14. A Familiar Horror Story
A SME wishes to hedge away the FX risk of its
exports against the steady appreciation of its
local currency against USD:
=> a right-way situation
Copyright ® 2011 Murex S.A.S. All rights reserved 14

15. A Familiar Horror Story
A SME wishes to hedge away the FX risk of its
exports against the steady appreciation of its
local currency against USD:
We can sell him a strip of put options
We make the product cheaper by limiting our
downside (KO)
The product is very popular but the market is
highly competitive: we can make it cheaper by
buying a call option that gets activated after
an OTM barrier level (or rather two or three).
This is still right-way, right?
Very limited downside, nice upside, covered
with collateral, in some instances back-to-
back : how bad can it get?
Copyright ® 2011 Murex S.A.S. All rights reserved 15

16. A Familiar Horror Story
Copyright ® 2011 Murex S.A.S. All rights reserved 16

17. A Familiar Horror Story
520 companies holding for over US$ 10b of
KIKOs
Average hedge ratio to annual export between
35% and 40%
68 SMEs with an average hedge ratio of 194%
Class-Action suit for mis-selling
Déjà vu - and though, firms in HK, India,
Indonesia, Taiwan, Brazil, Mexico, Poland posted
at least $30 billion losses on FXD in 2008.
Copyright ® 2011 Murex S.A.S. All rights reserved 17

18. A Familiar Horror Story: The
Gremlin Trade
From right-way to wrong- Collateralization questions:
way – Did CVA desks spot these CCR
concentrations?
– Trade size vs. turnover : an
– Many of those contracts were
extremely large exposure will collateralized on favorable terms
trigger a default to the banks, but with large
– Crowded trade remargining periods and with
KRW bonds.
Credit risk – Incidentally, an interesting
– Counterparty risk stress-test case for regional
CCPs and aspiring clearing
– Assimilation / Model risk
brokers (cf. IM calculation
– Reputation risk methods)
– Legal risk Some practical IT fixes
– Systemic risk
Copyright ® 2011 Murex S.A.S. All rights reserved 18

19. From Credit to Funding
Discounting
Credit risk
Calibration
Valuation
Copyright ® 2011 Murex S.A.S. All rights reserved 19

20. Funding un-collateralized trades
In any derivatives contract future cash-flow exchanges need to
be “funded”.
A bilateral position with an open negative MtM can be seen as an
overnight loan granted by the counterparty : logically this funding
benefit is financed at our cost of funds.
A positive MtM represents a funding cost : by unwinding the trade
and investing this amount with my treasury (or buying back my
own bond issue) I could get the same rate.
Hence an uncollateralized transaction’s Cash Flows should be
discounted at my senior unsecured cost of debt.
Neglecting the CDS-Bond basis, my senior unsecured cost of funds
is in line with the assumptions PDs and Recovery of the CVA
calculation. Hence at a single contract level (i.e. single deal or
netting set): DVA = Funding Benefit.
Copyright ® 2011 Murex S.A.S. All rights reserved 20

21. Funding cost: the (non-)effect of netting
2 parties A & B have two exactly offsetting trades but no
netting agreements between them:
– Both parties will have non-zero CVA & DVA terms (and bilateral CVA)
– They both have 0 funding cost as CFs will offset.
In practice whether a set of
transactions is covered by a
close-out netting provision
(ISDA) or not, has no implication
on their funding cost (and thus
the discounting curve to be used)
For non-fully netted portfolios the
Funding Benefit is not equal to
DVA!
– No close-out netting agreement
– Multiple netting sets
Copyright ® 2011 Murex S.A.S. All rights reserved 21

22. Funding collateralized trades
If a CSA is in place, the “lender” typically receives a collateral
for a value ~ equal to the MtM of the position, either as:
– a Cash amount, which can be re-invested (overnight) and on which a pre-
specified interest is paid back to the poster (typically compounded OIS
index).
– a Security. If the CSA agreement allows for re-hypothecation, that collateral
can be repo-ed to another party to fund at a much lower rate than an
unsecured funding rate.
– Simplifying assumptions: 0 Thresholds & MTAs, daily remargining, one
currency, no haircuts on securities, no dispute…
Hence CSA-covered positions can be funded by using an OIS
discount curve
Non CSA-covered positions are funded using the internal cost
of funds (senior unsecured debt)
Copyright ® 2011 Murex S.A.S. All rights reserved 22

23. The Ideal CSA Hypotheses
Bilateral Agreement
Continuous Margining
Instantaneous settlement of margin calls
0 Threshold and Minimum Transfer Amount
No Independent Amounts
No haircuts
Cash (or equivalent instrument) collateral, independent from exposure
No valuation differences
No disputes
Netting set = Margining set
No Initial Margin
CCR :
– No rehypothecation / segregation of collateral accounts
– No Initial Margin with risky entities
– No settlement risk on margin flows
Funding :
– Rehypothecation / no segregation of collateral accounts
– No Initial Margin
– Single risk-free collateral asset (e.g. no currency basis arbitrage)
Copyright ® 2011 Murex S.A.S. All rights reserved 23

24. New FO and Risk systems needs
Front-Office systems require flexible curve allocation
mechanisms:
– Collateral documentation is pricing data!
– Rule-based dynamic allocation of curves based on both the leg currency and underlying
collateral currency
Proper allocation of risk and sensitivities
– E.g. Uncollateralised CMS swap (CMS rate derived from collateralised instruments)
Need a multiple curve calibration engine:
– Able to detect the
dependencies
– Wider selection of curve
building instruments
– Simultaneous bootstrapping of
all involved curves with
accuracy and speed.
Copyright ® 2011 Murex S.A.S. All rights reserved 24

25. Pricing example
Uncollateralized USD CSA
In-the-money XCCY
swap EUR/USD with 5Y
outstanding maturity
P&L impact of 36bp
Forward MtM, vs.
Expected Exposure &
Expected Liability
evolution.
Copyright ® 2011 Murex S.A.S. All rights reserved 25

26. Pricing in a Multiple Curve Environment
Forwarding curves are derived from collateralized quotes
– Joint bootstrapping of discounting and forwarding curves
– E.g. EONIA and EURIBOR 3M, then EURIBOR 6M vs. 3M…
– Triangular calibration with XCCY basis curves or markets with varying liquid swap
tenors depending on the horizon.
Different discounting curves depending on the CSA clauses.
– EURIBOR swap collateralized in EUR is discounted on an EONIA curve
– EURIBOR swap collateralized in USD is discounted on a EUR/USD XCCY basis curve
built upon a USD Feds Funds curve.
Copyright ® 2011 Murex S.A.S. All rights reserved 26

27. Pricing in a Multiple Curve Environment
The new funding paradigm requires multi-curve
evolutions for derivatives pricing and CVA
estimation.
– Current standard market practice: deterministic basis spreads
curves on top of a risk-free OIS curve
– Currently testing a HJM 2F stochastic basis spread model,
calibrated to historical data (results to be presented soon).
Another difficult question pertains to
correlations
(OIS-LIBOR spread vs. rates, bond-CDS basis vs. LIBOR basis and
credit…)
Copyright ® 2011 Murex S.A.S. All rights reserved 27

28. Main issue: the CSA is not perfect
When exposure is in-between thresholds, we fund at
LIBOR + spread and not at OIS flat
Non-cash asset: haircuts and rehypothecation rights?
Choice of collateral currency:
– Steep XCCY basis spreads with the current USD squeeze
– Apparently comparable to a contingent Bermudan XCCY swaption on
the portfolio (hint at American Monte Carlo pricing)
– In practice varying implementation approaches
– However, uncertain execution / enforceability
• Different legal interpretations (US vs. UK law – do we require the consent of
the receiving party? Is full substitution always possible when there is no
margin call?...)
• Will the collateral management team deliver the adequate collateral?
– Will the issue disappear with the Standard CSA?
Does the local market even have a liquid OIS instrument?
One-way CSA case is another tricky case of funding
asymmetry (one threshold pushed to infinity)
Copyright ® 2011 Murex S.A.S. All rights reserved 28

29. One-Way Collateral Agreements
Part II
Funding cost at OIS flat
Funding benefit at unsecured debt level
Double hit: CVA & FVA
Usually SSAs will have much lower credit spreads than the institution so
the Funding risk effect would dominate the Credit risk one.
Difficult to value in the simple discount switch setting,
however actual quoted price is unlikely to be the “fair-one”.
Borrow at LIBOR + spread
Receive funding at OIS flat
Copyright ® 2011 Murex S.A.S. All rights reserved 29

30. Introducing the Standard CSA
New collateral support annex protocol promoted by
ISDA
Aim to standardize valuation practices
– Specify OIS discounting
– Remove the collateral switch optionality
– Align CSA to the margining mechanics of CCPs
0 Threshold, no MTA, daily margining
Cash collateral only for variation margin
Phased implementation in 2012 : transactions can
be moved from legacy CSA to S-CSA
Transactions pooled in 5 Designated Collateral
Currency buckets
Copyright ® 2011 Murex S.A.S. All rights reserved 30

31. Introducing the Standard CSA
Phase I
Discounting on USD
Local currency OIS discounting Feds Funds & corresponding
(EONIA, SONIA…) FX basis curves
CCS and
CHF trades EUR trades GBP trades JPY trades other
currencies
CHF EUR GBP JPY USD
collateral collateral collateral collateral collateral
balance balance balance balance balance
Margin
Calls / Deliveries
Counterparty
Herstatt Risk!
Copyright ® 2011 Murex S.A.S. All rights reserved 31

32. Introducing the Standard CSA
Phase II
CCS and
CHF trades EUR trades GBP trades JPY trades other
currencies
CHF EUR GBP JPY USD
collateral collateral collateral collateral collateral
balance balance balance balance balance
Margin
Calls / Deliveries
Safe settlement: PvP platform operated by ISDA
Swap margins to USD (ISA method)
Counterparty
Copyright ® 2011 Murex S.A.S. All rights reserved 32

33. Moving to S-CSA: system implication
Straight-forward
adaptation of the
CVA Monte Carlo Margining
Counterparties Netting Nodes
Nodes
Engine thanks to
dynamic
construction of the CSA – EUR
netting and
margining sets
(rule-based) …
ISDA - ABC
In practice, need CSA – USD*
to follow closely
migration of trade
Bank ABC
blocks (by Legacy CSA
products, entities) …
from legacy CSA to
SCSA margining. No collateral
Copyright ® 2011 Murex S.A.S. All rights reserved 33

34. S-CSA implementation challenges
ISDA : “Regardless of approach, firms will need to undertake considerable internal
technology and process re-engineering work to implement the SCSA.”
Collateral systems impact:
– Electronic messaging
– Exposure pooling and collateral accounts by currency buckets & flexible
mechanism to migrate positions off legacy CSA
– Mandatory OIS discounting
– Implementation of ISA & PvP processes
Front-office:
– Availability of collateral eligibility criteria at point of pricing
– Discount curve allocation mechanism based on CSA / SCSA mappings
– For a period of time maintain local OIS curves and Basis OIS curves
CVA / FVA units
– Consistent mapping of the positions to currency buckets
– Multiple margining sets per netting set
– Value margin conversion via ISA-type method and capture FX risk over
MPR
Copyright ® 2011 Murex S.A.S. All rights reserved 34

35. FVA - Collateral Modeling
An alternative approach to the Discount Method consists in
looking at the question from a portfolio level by representing the
funding cost as another valuation adjustment
(the OIS curve providing a proxy for the risk-free rate).
Evolve market rates and explicitly model the collateral balances
and a funding strategy. E.g.
– Collateral balance : funded at OIS flat
– Portfolio value – balance : shortfall funded at own cost of funds
Extend existing CVA simulation framework since this will provide:
– A consistent pricing framework for CVA and FVA (calibration, deal aging and termination
events)
– The CVA engine already has all required business logic (margining set mapping, curve and
spreads evolution)
– A validated & controlled infrastructure : inter-system data flows, interfaces, reconciliation
processes
– A low & managed TCO, as one can leverage existing infrastructure (e.g. grid, GPU farm) :
running FVA calculations on top of a CVA simulation is computationally efficient (provided i.
consistent modeling assumptions and ii. that collateralized positions are already included)
Copyright ® 2011 Murex S.A.S. All rights reserved 35

36. FVA - Collateral Modeling
Rates curves are
evolved jointly
Margining
Counterparties Netting Nodes
Nodes
Collateral
Balances are
obtained at the CSA – EUR
margining node
level
…
ISDA - ABC
Collateral assets
are funded at the CSA – USD*
Agreement’s
Bank ABC
specified rate
source Legacy CSA
…
Collateral
shortfalls funded No collateral
on funding curve
Copyright ® 2011 Murex S.A.S. All rights reserved 36

37. FVA - Collateral Modeling
Practical simulation implementation : DVA is not the FVA
benefit (MPR vs. Settlement lag).
Margin Period of Risk
Settlement
Lag
Collateral
Funding
Collateral Balance (FVA)
Collateral Balance (CVA)
Simulation Simulation
Ti - MPR Ti - SL
date Ti-1 date Ti
Copyright ® 2011 Murex S.A.S. All rights reserved 37

38. FVA - Collateral Modeling
Reducing the MPR (10 days)
to the Settlement lag (3
days) halves the DVA
estimate.
Final FVA impact would be
stronger on portfolios with
imbalanced EPE/ENE profiles
or asymmetric collateral
terms (thresholds, IAs, one-
way CSA).
Copyright ® 2011 Murex S.A.S. All rights reserved 38

39. What about FVA for CCP-cleared products?
Margin requirement broadly split in IM and VM
IM typically much larger and aimed at covering gap risk over the
auctioning period (so as to preserve default funds contributions)
IM models are typically VaR-based (adjusted with credit and
liquidity factors)
The IM funding requirement will then depend on the
“directionality” of the cleared portfolio!
Should this additional cost be modeled on an incremental basis
(consistent with CVA and OTC FVA), or handled as a post trade
operational cost? Incentives may differ vastly depending on the
institution.
Extending the CVA/FVA model to provide estimation of forward
Initial Margin requirements would require a forward approximation
of the margining sets VaR. Computationally, the issue is similar to
the estimation of the incremental RWA cost of capital.
Copyright ® 2011 Murex S.A.S. All rights reserved 39

40. Variation Margin and Initial Margin
FVA for cleared products should, in theory, account for the
incremental cost of funding the Initial Margin
5 days to close the auctioning process
High C.L.
VaR
Initial Margin
Variation Margin
Position at Ti-1 Position at T
Copyright ® 2011 Murex S.A.S. All rights reserved 40

41. An open question
Should we look at aligning the industry’s modeling of MPR and close-
out gap risk for CVA/PFE with the CCPs’ I.M. estimation models?
– Standard I.M. models implemented at CCPs
– Volatility vs. time-acceleration
– Directionality of underlying netting
sets exposures
– Adjustments for systematically important
financial institutions. Initial Margin
– Contingent funding stress
vs. WWR models
Position at T
Copyright ® 2011 Murex S.A.S. All rights reserved 41

42. Questions and practical issues
Vanillas are de-facto level-2 derivatives and market prices are not
transparent (difficulty to unwind off-market positions)
Broker quotes need to be reinterpreted (e.g. B&S vols)
New premium quotation modes (unfortunately not applicable for all
types of options)
Sensitivities and hedge ratios differ between collateralized and
uncollateralized cases
Perfect hedge can only be achieved under identical collateralization
terms
Pricing effects are complex to quantify for imperfect
collateralization cases and embedded optionalities
Difficult /costly hedging of basis risks
Convexity and wrong-way funding effects deemed small (price
impact smaller than bid-ask) but traders need to be aware of them
Which CSA clauses should be modeled / can be hedged ?
Copyright ® 2011 Murex S.A.S. All rights reserved 42

43. Questions and practical issues
Internal organization challenges:
Need to implement consistent pricing of new transactions, unwinds
and legacy books
Fair pricing of internal positions
Ownership of the funding issue and hedging
Ensure that the Collateral Management & Treasury functions
provide optimal funding (as supposed in the pricing)
Integration of data flows and inter-operability : both a processes
and systems challenge !
Establish clear-cut transfer pricing and cost management policies
Copyright ® 2011 Murex S.A.S. All rights reserved 43

44. Two modeling and organizational models
Discount curves method Global FVA/CVA exposure method
Simpler to implement in a crude way, Requires significant investments (starting with
additional complexity with curves a simulation framework)
management and FO assignments Global hybrid pricing consistent across desks
Trade pricing compatible with local desk and with CVA.
models. Flexible handling of CSA agreements and
Fail to account for corner cases explicit modeling of the funding strategy
– asymmetric funding terms – Reproduces the previous method results under
– convexity effects (e.g. spread / rates correlation) specific cases
– liquidation value different from risk-free value – Can include funding impact of credit mitigants
Non-explicit link with DVA Isolates clearly funding cost from valuation and
CVA/DVA
Deal-level and easily understood by traders Portfolio-level, cost reallocated to the trades
Funding and convexity risk owned by the (like CVA)
traders Funding and convexity risk transferred to a
Works best with smaller decentralized centralized Funding / Treasury desk
operations well collateralized Works best when bringing together Treasury,
CVA and Collateral trading operations
Open question : what should be the regulatory treatment of the FVA market risk in the
second setting? FVA VaR integrated in the IMA model?
Copyright ® 2011 Murex S.A.S. All rights reserved 44

45. Some useful references
Collateralization & Counterparty Risk:
D. Brigo & A. Pallavicini (2011) – Arbitrage-Free Counterparty Risk Valuation
under Collateral Margining
D. Brigo (2011) – Counterparty Risk FAQ: Credit VaR, PFE, CVA, DVA, Closeout,
Netting, Collateral, Re-Hypothecation, WWR, Basel, Funding, CCDS and Margin
Lending.
J. Gregory (2009) – Being two-faced over counterparty risk
J. Hull & A. White (2011) – CVA and Wrong Way Risk.
ISDA (2011) – Overview of ISDA Standard Credit Support Annex (SCSA).
M. Pykhtin (2010) – Collateralised credit exposure, in Counterparty Credit Risk,
edited by E. Canabarro, Risk Books.
M. Pykhtin & D. Rosen (2010) – Pricing Counterparty Risk at the Trade Level and
CVA Allocations.
Books:
J. Gregory – Counterparty credit risk – The new challenge for global financial
markets. Wiley Finance.
G. Cesari & al. – Modelling, Pricing, and Hedging Counterparty Credit Exposure.
Copyright ® 2011 Murex S.A.S. All rights reserved 45

46. Some useful references
Collateralization & Funding:
C. Fries (2010) – Discounting Revisited: Valuation Under, Funding, Counterparty
Risk and Collateralisation.
M. Fuji, Y. Shimada & A. Takahashi (2010) – Collateral Posting and Choice of
Collateral Currency.
A. Green (2011) – Engineering a CVA and FVA solution, talk given at the WBS
Discounting and Funding conference , November.
M. Morini & A. Prampolini (2010) – Risky funding: a unified framework for
counterparty and liquidity charges.
V. Piterbarg (2010) – Funding beyond discounting: collateral agreements and
derivatives pricing, Risk Magazine, February issue.
Risk Magazine (2011) – The evolution of swap pricing. Nick Sawyer, March issue.
M. Singh & J. Aitken (2010) – The (sizable) Role of Rehypothecation in the
Shadow Banking System.
Blogs:
Deus ex Macchiatto (blog.rivast.com).
FT Alphaville (ftalphaville.ft.com).
Copyright ® 2011 Murex S.A.S. All rights reserved 46

47. THANK YOU
alexandre.bon@murex.com
47