MATH40730 Counterparty Credit Risk

Academic Year 2021/2022

This module is an introduction to credit valuation adjustment (CVA), bilateral risk (CVA and DVA), collateral modelling and funding. Topics include: an introduction to credit risk and a review of debt securities; review of derivative securities; credit risk models; credit default swaps; counterparty credit risk for derivative securities; value adjustments for derivative securities.

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Curricular information is subject to change

Learning Outcomes:

Understand the causes and consequences of credit risk applied to cash and derivative financial securities.
Review the assumptions underlying various derivative pricing models and to consider the impact of the credit risk and funding requirements on these models.
Understand the major categories of credit risk models.
Analyse the drivers of counterparty credit risk for different categories of derivative securities.
Develop mathematical models to quantify various valuation adjustments for derivatives securities.
Analyse the pricing dynamics of these valuation adjustment models.

Student Effort Hours: 
Student Effort Type Hours
Lectures

36
Tutorial

12
Autonomous Student Learning

152
Total

200
Approaches to Teaching and Learning:
Lectures, tutorials, enquiry and problem-based learning. 
Requirements, Exclusions and Recommendations
Learning Requirements:

It is necessary for the student to have taken MATH40430 and ACM30080 (or equivalent) in order to take this module. It is also necessary for the student to have taken MATH40690 and MATH40720.


Module Requisites and Incompatibles
Not applicable to this module.
 
Assessment Strategy  
Description Timing Open Book Exam Component Scale Must Pass Component % of Final Grade
Continuous Assessment: Continuous assessment:
-Homework 1 (10%)
-Homework 2 (20%)
-Mid term exam (10%)		 Throughout the Trimester n/a Standard conversion grade scale 40% No

40
Examination: Written examination. 2 hour End of Trimester Exam No Standard conversion grade scale 40% No

60

Carry forward of passed components
No
 
Resit In Terminal Exam
Summer No
Please see Student Jargon Buster for more information about remediation types and timing. 
Feedback Strategy/Strategies

• Group/class feedback, post-assessment

How will my Feedback be Delivered?

Not yet recorded.

D. Brigo, F. Mercurio, Interest Rate Models - Theory and Practice (Second Ed.), Springer Verlag 2006, Chapters 21 -- 23.
D. Brigo, M. Morini, A. Pallavicini, Counterparty Credit Risk, Collateral and Funding, John Wiley & Sons 2013.
J. Gregory, Counterparty Credit Risk and Credit Value Adjustment (Second Ed.), John Wiley & Sons 2012.
J. Gregory, The XVA Challenge (Fourth Ed.), John Wiley & Sons 2020.
J. Hull, Options, Futures, and Other Derivatives (Tenth Ed.), Pearson 2018.
A. J. McNeil, R. Frey, P. Embrechts, Quantitative Risk Management, Princeton Series in Finance, Princeton University Press 2005, Chapter 10.
Name Role
Mr Joe Naughton Lecturer / Co-Lecturer