The lecture Quantifying CCR by Edu Pristine is from the course Archiv - Credit Risk (FRM). It contains the following chapters:
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... Collateral also creates operational, FX and liquidity risk which must be effectively managed. Remargin period (margin call frequency) is the period from which a collateral call takes place to when collateral is actually delivered. It reflects the period of extreme exposure to other counterparty seeking collateral and default ...
... E is volatility of collateralized exposure and TM is the remargin frequency in years, PFE is the value of mark-to - marketed exposure at some future point ...
... large threshold or Minimum Transfer Amount which results in a uncollateralized situation. Uncertainty of collateral volatility is not captured. Liquidity and liquidation risks are not accounted for. Actual volatility may differ from implied volatility (expected volatility) ...
... X Exposure volatility X Collateral volatility - Overall risk of the position can be then calculated as K x Effective volatility xTm. ...
... in collateral agreement like threshold, rounding, MTA. Imperfect collateralization occurs when exposure at any time after last remargin period exceeds collateral exposure could increase in between margin calls. Collateral being demanded is path dependent effectiveness of collateral ...
... calculation of collateral called or returned at each point in time. Calculation of collateralized exposure ...
... returned back as exposure decreases. In case of a negative MtM exposure, collateral can increase risk when posted with a counterparty and as exposure increases collateral must be returned back. Minimum Transfer Amount may result in under-collateralization ...
... Full collateralization reduces exposure significantly and also eases quantification due to shortening of risk horizon. When Thresholds are included they help achieve a balance between acceptable exposure and a manageable operational workload of collateral management. ...
... to default of security posted as collateral will not serve the intended purpose. Foreign Exchange Risk when the counterparties have different currencies and the collateral carries FX risk which must be hedged dynamically. ...