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Counterparty Risk Management

Edited By Eduardo Canabarro and Michael Pykhtin


Joining forces to update their respective bestsellers Counterparty Credit Risk and Counterparty Credit Risk Modelling, editors Eduardo Canabarro (of Morgan Stanley) and Michael Pykhtin (of the Federal Reserve Board of Governors) have assembled a team of experts to provide a comprehensive and contextualized understanding of the current status and key issues in counterparty risk management in the wake of the financial crisis.

Michael is the well deserved recipient of Risk Magazine’s Quant of the Year award for 2014.

Scheduled publication date: 14 May 2014

Availability: Available for Pre-order. Book will be dispatched as soon as it’s available.



£145.00 Save £21.75


Book description

Counterparty risk is a topic which has been elevated to the forefront of the front office, risk management and regulatory agendas following mark-to-market volatility and defaults over the global financial crisis.

Universal acknowledgement of credit valuation adjustment (CVA) and debt valuation adjustment as essential components within the fair-value of derivatives and securities financing transactions has reinforced the importance of counterparty risk management across a much broader spectrum of financial services firms.

Counterparty Risk Management is a collection of clear and concise articles produced by some of the most experienced and prominent professionals in the field affiliated with such respected institutions as the Federal Reserve Board of Governors, UBS, JP Morgan and Credit Suisse. 

The content of Counterparty Risk Management is part of the daily job of any financial industry related professional and each chapter will address a key aspect of counterparty risk.

This book is essential reading not only for quants and practitioners to understand the substantive and often technical issues at hand, but for a wide cross-section of readers, from risk managers, regulators and policy makers, to consultants, accountants, lawmakers, auditors and researchers.

Book details

Publish date
14 May 2014
155mm x 235mm

Editor biography

Eduardo Canabarro and Michael Pykhtin

Eduardo Canabarro

Eduardo is the Managing Director, Global Head of Risk Analytics at Morgan Stanley. He is responsible for the bank’s risk measurement models used for market, credit, operational risks, stress testing and economic capital; for the validation of the pricing models of the bank's trading desks; and for the calculation of the model-based regulatory capital measures used in Basel 2, 2.5 and 3.

Prior to Morgan Stanley, Eduardo has worked at Lehman Brothers, Goldman Sachs and Salomon Brothers in various quantitative research and quantitative risk management capacities.

Eduardo has been an active researcher in the field of applied quantitative finance through his 20-year career in the financial industry. His work has been published in the Journal of Financial Engineering, Journal of Fixed Income, The Journal of Risk Financing, Journal of Risk and Re-Insurance, Crediflux and RISK magazine. Eduardo’s ideas have been influential in shaping the credit risk measurement frameworks of Basel 2 and 3 as well as the current Fundamental Review of the Trading book.

Eduardo is a member of risk management and capital committees at ISDA, IIF, and SIFMA. He is a member of the Board of Directors of the International Association of Financial Engineers (IAFE). He holds degrees of Electrical Engineering and MBA in Finance from UFRGS, Brazil, as well as MS and PhD degrees in Finance from the University of California at Berkeley, USA.

Michael Pykhtin

Michael Pykhtin is a manager in the Quantitative Risk Management section at the U.S. Federal Reserve Board. Prior to joining the FRB in 2009 as a senior economist, Michael was a senior quantitative analyst at Bank of America, responsible for developing new counterparty risk methodologies for the bank’s portfolio of OTC derivatives. Prior to joining Bank of America in 2005, he was a quantitative analyst at KeyCorp, responsible for developing models of portfolio credit risk and economic capital for the bank’s portfolio of loans and structured credit products.

Michael has edited “Counterparty Credit Risk Modelling” (Risk Books, 2005), which was the first book entirely devoted to counterparty risk. He is also a contributing author to several recent edited collections. Michael has published extensively in the leading industry journals, including Risk Magazine, Journal of Credit Risk and Journal of Risk Management in Financial Institutions. He has been an associate editor of the Journal of Credit Risk since 2007.

Michael is the recipient of Risk Magazine’s Quant of the Year award for 2014. Michael holds a Ph.D. degree in Physics from the University of Pennsylvania and an M.S. degree in Physics and Applied Mathematics from Moscow Institute of Physics and Technology.

Table of contents


Part 1 - Regulation

Chapter 1: The Basel III Enhancements to Counterparty Risk Capital Charges
David Lynch (Federal Reserve Board of Governors)

Chapter 2: The Regulation of Counterparty Risk in Over-the-Counter Derivatives Markets
Erik Heitfield and Sean Campbell (Federal Reserve Board of Governors)

Chapter 3: The Non-Internal-Model Method for Counterparty Credit Risk
Michael Pykhtin (Federal Reserve Board of Governors)

Chapter 4: On Credit Valuation Adjustments and Regulatory Capital
Henry Wayne (Citi)

Part 2 - Exposure Modelling

Chapter 5: American Monte Carlo: A Practitioner Approach
Giovanni Cesari (UBS)

Chapter 6: Best Market Practice for Calculation and Reporting of Wrong-Way Risk
Jon Gregory (Solum Financial Partners), Andrew Aziz (IBM Risk Analytics), Bob Boetcher (IBM Risk Analytics) and Alex Kreinin (IBM Risk Analytics)

Chapter 7: Central Counterparty Risk
Matthias Arnsdorf (JP Morgan)

Part 3 - Pricing and Hedging

Chapter 8: CVA Risk Management Post-Crisis
David Goulding (Bank of America)

Chapter 9: Re-Thinking CVA: Valuations, Counterparty Credit Risk and Model Risk
Dan Rosen (S&P Capital IQ) and David Saunders (University of Waterloo)

Chapter 10: Should Derivatives Dealers Make a Funding Value Adjustment?
John Hull and Alan White (University of Toronto)

Chapter 11: Adjoint Algorithmic Differentiation (AAD): Real Time Counterparty Credit Risk Management in Monte Carlo
Luca Capriotti and Jacky Lee (Credit Suisse)

Part 4 - Stress Testing and Collateral

Chapter 12: Stress Test of Counterparty Risks and Dynamic Hedging of the CVA
Eduardo Canabarro (Morgan Stanley)

Chapter 13: Dynamic Stress Testing of Counterparty Default Risk
Greg Hopper (Goldman Sachs)

Chapter 14: Collateral: Modelling, Pricing and Optimisation
Giovanni Cesari, Zlatko Filipovic and Gordon Lee (UBS)

This is provisional table of contents and is subject to change prior to publication

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