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Financial Engineering Workshop - Michael Pykhtin (U.S. Federal Reserve Board)
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Abstract
We present a non-model framework for calculating exposure at default for counterparty credit risk analytically. While the proposed framework is based on the same fundamental assumption (that future transaction market values are normally distributed) as is used in the standardized approach for counterparty credit risk (SA-CCR), it manages to substantially improve on the SA-CCR’s risk sensitivity. The framework estimates the expected exposure at multiple future time points based on simple forward projections of internally calculated spot market values and their sensitivities to risk factors. The proposed framework is sufficiently flexible to establish any desired level of conservatism, which makes it suitable for potential regulatory applications.
Bio
Michael Pykhtin is a manager in the Policy Research and Analytics function at the U.S. Federal Reserve Board. Prior to joining the Board in 2009 as a senior economist, he had a successful nine-year career as a quantitative researcher at Bank of America and KeyCorp. Michael has edited “Margin in Derivatives Trading” (Risk Books 2018), “Counterparty Risk Management” (Risk Books, 2014) and “Counterparty Credit Risk Modelling” (Risk Books, 2005); he is also a contributing author to several recent edited collections. Michael has published extensively in the leading industry journals; he has been an Associate Editor of the Journal of Credit Risk since 2007. Michael is a two-time recipient of Risk Magazine's Quant of the Year award (for 2014 and 2018). Michael holds a Ph.D. degree in Physics from the University of Pennsylvania and an M.S. degree in Physics and Applied Mathematics from Moscow Institute of Physics and Technology.
Please register the day before the workshop to receive the link to the online seminar, otherwise you may not be given access.
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Online Event
Online Event