The xVA Challenge: Counterparty Credit Risk, Funding, Collateral and Capital

by Jon Gregory

A detailed, expert-driven guide to today's major financial point of interest The xVA Counterparty Credit Risk, Funding, Collateral, and Capital is a practical guide from one of the leading and most influential credit practitioners, Jon Gregory. Focusing on practical methods, this informative guide includes discussion around the latest regulatory requirements, market practice, and academic thinking. Beginning with a look at the emergence of counterparty risk during the recent global financial crisis, the discussion delves into the quantification of firm-wide credit exposure and risk mitigation methods, such as netting and collateral. It also discusses thoroughly the xVA terms, notably CVA, DVA, FVA, ColVA, and KVA and their interactions and overlaps. The discussion of other aspects such as wrong-way risks, hedging, stress testing, and xVA management within a financial institution are covered. The extensive coverage and detailed treatment of what has become an urgent topic makes this book an invaluable reference for any practitioner, policy maker, or student. Counterparty credit risk and related aspects such as funding, collateral, and capital have become key issues in recent years, now generally characterized by the term 'xVA'. This book provides practical, in-depth guidance toward all aspects of xVA management. The sudden realization of extensive counterparty risks has severely compromised the health of global financial markets. It's now a major point of action for all financial institutions, which have realized the growing importance of consistent treatment of collateral, funding, and capital alongside counterparty risk. The xVA Counterparty Credit Risk, Funding, Collateral, and Capital provides expert perspective and real-world guidance for today's institutions.

Genres: Finance

497 pages, Kindle Edition

First published September 11, 2015

Reviews

[Jeremy Lo · Rating 4 out of 5]

Well written. Easy to read, yet providing a good amount of technical details. The author is able to articulate fairly complicated and technical ideas in a precise and intuitive manner; he also put emphasis on the historical development of the financial system/regulatory landscape, which really helps the readers to understand the motivation and context of various risk metrics.

This book is informative and stimulating. Excellent read for those who are relatively new to/interested in the CCR/xVA industry; be that in S&T, risk management, or quant analytics.

Note that the book is not particularly mathematical, it is a rather high level conceptual introduction to CCR/xVA. Not particularly useful for readers who want to learn how to price xVA.

[Gabriel Garbi · Rating 5 out of 5]

I could not finish the entire book, but most of it. I can say it is worth reading from page 1 to the end, because it’s a narrative, building floor by floor and bringing amazing information that are not available in easy sources. The math is not complex and I would say half of the book is reasoning and markets information, not calculations.
The examples are very good and the support material also spectacular. I wish I could find a book like this on other subjects, so I could deeply and better understand subjects.

[Josie · Rating 5 out of 5]

I've worked in this field for 6 years and this book (updated one including KVA, CCPs and collateral finding in detail) by far the most detailed and accurate overview, best accessible to those who have good grasp of financial maths and financial markets, especially derivatives although I don't think essential. I read prior book focused on CVA initially approx 7years whilst interning and reread recently this version!

[Daniel · Rating 4 out of 5]

Wordy, light on math (perhaps expected from a book that germinated from banking regulations). A good business overview of modern credit, and to a lesser extent -- market, risk none the less.

[Elizabeth · Rating 5 out of 5]

I'm relatively new to finance in general, but this book explained the various adjustments and how they work together in a way that was surprisingly easy to understand. Great high level of the field that also provides a lot of references for learning more about each individual xVA component.