Geurdes, Han / J. F. (2011): On the mathematical form of CVA in Basel III.

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Abstract
Credit valuation adjustment in Basel III is studied from the perspective of the mathematics involved. A bank covers marktomarket losses for expected counterparty risk with a CVA capital charge. The CVA is known as credit valuation adjustments. In this paper it will be argued that CVA and conditioned value at risk (CVaR) have a common mathematical ancestor. The question is raised why the Basel committee, from the perspective of CVaR, has selected a specific parameterization. It is argued that a finetuned supervision, on the longer run, will be beneficial for counterparties with a better control over their spread.
Item Type:  MPRA Paper 

Commentary on:  Eprints 0 not found. 
Original Title:  On the mathematical form of CVA in Basel III. 
Language:  English 
Keywords:  CVA, CVaR, statistical methodology. 
Subjects:  C  Mathematical and Quantitative Methods > C0  General > C02  Mathematical Methods A  General Economics and Teaching > A1  General Economics > A14  Sociology of Economics C  Mathematical and Quantitative Methods > C0  General > C01  Econometrics 
Item ID:  30955 
Depositing User:  Han / J. F. Geurdes 
Date Deposited:  18. May 2011 12:59 
Last Modified:  24. Mar 2015 05:31 
References:  [1] Basel III: A global regulatory framework for more resilient banks and banking systems, Basel Committee on Banking Supervision, december 2010. [2] Messages from the academic literature on risk measurement for the trading book, Basel Committee on Banking Supervision, januari 2011. [3] Position paper on a countercyclical capital buffer,www.cebs.org/getdoc/715bc0f97af947d998a8778a4d20a880/CEBSpositionpaperonacountercyclicalcapitalb.aspx. [4] Basel II: International Convergence of Capital Measurement and Capital Standards, Basel Committee on Banking Supervision, june 2006, Annex 4. [5] R.T. Rockafellar and S. Uryasev, Optimization of conditional value at risk, Preprint: University of Florida, Dept. of Industrial and Systems Engineering, PO Box 116595, 303 Weil Hall, Gainesville, FL 326116595, Email: uryasev@ise.ufl.edu, URL: http://www.ise.ufl.edu/uryasev [6] A. Kolmogorov, Grundbegriffe der Wahrscheinlichkeitsrechnung, Julius Springer, Berlin, (1933). [7] A. Shapiro and Y.Wardi, Nondifferentiability of the SteadyStateFunction in Discrete Event Dynamic Systems, IEEE Trans. on Aut. Contr 39. 17011711 (1994). 
URI:  https://mpra.ub.unimuenchen.de/id/eprint/30955 
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 Geurdes, Han / J. F. On the mathematical form of CVA in Basel III. (deposited 18. May 2011 12:59) [Currently Displayed]