Modelling, Pricing, and Hedging Counterparty Credit Exposure: A Technical Guide

It was the end of 2005 when our employer, a major European Investment Bank, gave our team the mandate to compute in an accurate way the counterparty credit exposure arising from exotic derivatives traded by the firm. As often happens, - posure of products such as, for example, exotic interest-rate, or credit derivatives were modelled under conservative assumptions and credit officers were struggling to assess the real risk. We started with a few models written on spreadsheets, t- lored to v...