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Wrong-way Risk - Correlation Coefficient Calibration

The result's identifiers

  • Result code in IS VaVaI

    <a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11320%2F15%3A10313787" target="_blank" >RIV/00216208:11320/15:10313787 - isvavai.cz</a>

  • Result on the web

    <a href="http://dx.doi.org/10.5300/IB" target="_blank" >http://dx.doi.org/10.5300/IB</a>

  • DOI - Digital Object Identifier

    <a href="http://dx.doi.org/10.5300/IB" target="_blank" >10.5300/IB</a>

Alternative languages

  • Result language

    angličtina

  • Original language name

    Wrong-way Risk - Correlation Coefficient Calibration

  • Original language description

    Under the new Basel III banking regulation banks should include wrong-way risk (WWR) into the calculation of the credit valuation adjustment (CVA) of the OTC derivatives. WWR takes place when the exposure to a counterparty is adversely correlated with the credit quality of that counterparty. Assuming a link between the interest rate swap (IRS), i.e. financial derivative in which two counterparties repeatedly exchange cash flows based on interest rate value and that the default time is represented by a Gaussian copula with a constant correlation coefficient, the WWR is expressed by this correlation coefficient. Because the observation of the default time means bankruptcy of the company, the correlation cannot be simply estimated using the observed datain contrast to the credit default swap (CDS) rate which is related to the intensity of default. Based on available daily Czech Republic government IRS and CDS rates we estimated the correlation using maximum likelihood method assuming tha

  • Czech name

  • Czech description

Classification

  • Type

    J<sub>x</sub> - Unclassified - Peer-reviewed scientific article (Jimp, Jsc and Jost)

  • CEP classification

    BB - Applied statistics, operational research

  • OECD FORD branch

Result continuities

  • Project

    <a href="/en/project/GBP402%2F12%2FG097" target="_blank" >GBP402/12/G097: DYME-Dynamic Models in Economics</a><br>

  • Continuities

    S - Specificky vyzkum na vysokych skolach

Others

  • Publication year

    2015

  • Confidentiality

    S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Data specific for result type

  • Name of the periodical

    Informační bulletin České statistické společnosti

  • ISSN

    1804-8617

  • e-ISSN

  • Volume of the periodical

    26

  • Issue of the periodical within the volume

    1-2

  • Country of publishing house

    CZ - CZECH REPUBLIC

  • Number of pages

    9

  • Pages from-to

    1-9

  • UT code for WoS article

  • EID of the result in the Scopus database