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Collateral management is the method of granting, verifying, and giving advice on collateral transactions in order to reduce credit risk in unsecured financial transactions. The fundamental idea of collateral management is very simple, that is cash or securities are passed from one counterparty to another as security for a credit exposure. [9]
A Credit Support Annex (CSA) is a legal document that regulates credit support for derivative transactions.Effectively, a CSA defines the terms under which collateral is posted or transferred between swap counterparties to mitigate the credit risk arising from in the money derivative positions.
XVA Desks - A New Era for Risk Management. Palgrave Macmillan UK. ISBN 978-1-137-44819-4. Antoine Savine and Jesper Andreasen (2021). Modern Computational Finance: Scripting for Derivatives and XVA. Wiley. ISBN 978-1119540786. Donald J. Smith (2017). Valuation in a World of CVA, DVA, and FVA: A Tutorial on Debt Securities and Interest Rate ...
A central clearing counterparty (CCP), also referred to as a central counterparty, is a financial market infrastructure organization that takes on counterparty credit risk between parties to a transaction and provides clearing and settlement services for trades in foreign exchange, securities, options, and derivative contracts. CCPs are highly ...
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Working with the asset management firm that selects the CDO's portfolio, the underwriter structures debt and equity tranches. This includes selecting the debt-to-equity ratio, sizing each tranche, establishing coverage and collateral quality tests, and working with the credit rating agencies to gain the desired ratings for each debt tranche.
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The word derivative sounds fancy and perhaps a little intimidating. But the key thing to know about derivatives is that they are a financial contract whose value is derived from the value of ...