Kratochwil, Michael (2021) Credit exposure under the new standardized approach for counterparty credit risk: fixing the treatment of equity options. JOURNAL OF CREDIT RISK, 17 (1). pp. 31-60. ISSN 1744-6619, 1755-9723
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The new standardized approach for measuring counterparty credit risk exposures (SA-CCR) will replace the existing regulatory standard methods for exposure quantification. There is ongoing discussion with respect to the calibration and appropriate treatment of nonlinear products under the SA-CCR. The calibration of supervisory parameters for equity derivatives has been a particular bone of contention. Further, the SA-CCR struggles with the adequate reflection of nonstandard options. Our paper provides empirical evidence that the SA-CCR parameters are not aligned with historically observed volatilities. We explore a potential alignment of the SA-CCR with the new standardized approach for market risk (SA-TB) as well as the application of economic delta adjustments for path-dependent equity products. Our results demonstrate that an alignment of SA-CCR and the SA-TB could lead to a significantly improved risk assessment for equity derivatives.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | counterparty credit risk; standardized approach for counterparty credit risk (SA-CCR); regulatory capital; credit exposure; equity options |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Statistik und Risikomanagement (Prof. Dr. Rösch) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 17 Aug 2022 09:32 |
| Last Modified: | 17 Aug 2022 09:32 |
| URI: | https://pred.uni-regensburg.de/id/eprint/46529 |
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