Credit exposure is the amount a bank can potentially lose in the event that one of its counterparties default. The measurement of exposure on derivative contracts is very important because it is used not only to set up the trading limits but also as an essential input to the bank's economic and...

We described the treatment of counterparty credit risk of OTC derivatives under Basel II. According to this framework, minimum capital requirements for counterparty credit risk are to be calculated according to the corporate loan rules applied to the appropriate exposure at default (EAD)...

The approach consists of imbedding the original control problem tightly in a convex mathematical programming problem on the space of measures and then solving the latter problem by duality in convex analysis. The dual to the control problem is to find the supremum of all smooth subsolutions to...

We examine the relation between the probability of future stock price crash and investors’ investment horizons. Using negative skewness as a proxy for firm-specific crash risk, we document a positive association between institutional ownership and stock price crash risk. The relation is,...