Zhou, Richard (2010): Counterparty Risk Subject To ATE.
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Rating trigger ATE (Additional Termination Event) is a counterparty risk mitigant that allows banks to terminate and close out bilateral derivative contracts if the credit rating of the counterparty falls below the trigger level. Since credit default is often preceded by rating downgrades, ATE clause effectively reduces the counterparty credit risk by early termination of exposure. However, there is still the risk that counterparty may default without going through severe downgrade. This article presents a practical model for valuating CVA in the presence of ATE.
|Item Type:||MPRA Paper|
|Original Title:||Counterparty Risk Subject To ATE|
|Keywords:||Counterparty Risk, Credit Valuation Adjustment, Rating Transition, Rating Trigger, Additional Termination Event|
|Subjects:||C - Mathematical and Quantitative Methods > C0 - General > C00 - General|
|Depositing User:||Richard Zhou|
|Date Deposited:||17. Jan 2011 14:30|
|Last Modified:||31. Dec 2015 17:51|
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