We present a dialogue on Counterparty Credit Risk touching on Credit Value at Risk (Credit VaR), Potential Future Exposure (PFE), Expected Exposure (EE), Expected Positive Exposure (EPE), Credit Valuation Adjustment (CVA), Debit Valuation Adjustment (DVA), DVA Hedging, Closeout conventions,...

Credit risk models have played a key part in the global credit crisis. The main shortcomings of these models are examined and a new causal framework is proposed to build deductive credit default models that have predictive capabilities

We propose an explanation for default contagion based on a Lucas model with two independent debt-financed trees. The transmission mechanism is that variations in the size of one tree impact the level of risk premium and the default decision for all borrowers. If a negative shock hits one tree,...

This paper develops a structural model for the valuation of sovereign debt in which a sovereign country faces a strategic default decision under the risk of experiencing a banking crisis. The sovereign's default policy is governed by the trade-off between lower debt-servicing expenditures and...

I formulate a general model of fire sales in which multiple heterogeneous investors, each investing in multiple assets, become forced sellers due to exogenous price shocks. Simultaneously prices endogenously adjust based on the volume of forced sales. This induces strategic interaction between...

This paper evaluates the impact of accounting and market-driven information on the prediction of bankruptcy for Greek firms using the discrete hazard approach. The findings show that a hazard model that incorporates three accounting ratio components of Z-score and three market-driven variables...

In this paper we apply the Contingent Claims Analysis (CCA) to the banking sector in Greece with a particular focus on the years of the Greek debt crisis. Greece was selected primarily because its banking sector was hit hard due to the country's government debt default and its large exposure to...

Pricing and hedging structured credit products poses major challenges to financial institutions. This has become very clear during the recent credit crisis. This paper puts several valuation approaches through a crucial test: How did these models perform in one of the worst periods of economic...

This paper studies strategic savings and free-riding behaviours among ex- ante vulnerable firms in a fixed debt network under linear and quadratic default punishment structures. We specifically pay attention to networks without ex-ante default feedbacks. Results show Nash equilibrium are unique,...

On May 11-12, 2011, SUERF, the Belgian Financial Forum, the Brussels Finance Institute and the Centre for European Policy Studies (CEPS) jointly organised the 29th SUERF Colloquium New paradigms in money and finance? The papers included in this SUERF Study are based on contributions to the...