*FRM Learning Objective* Describe and calculate the following metrics for credit exposure: expected mark-to-market, expected exposure, potential future exposure, expected positive exposure and negative exposure, effective expected positive exposure, and maximum exposure.
Thanks for the video, very helpful. Can you explain what you mean by saying that average EPE goes into the calculation of CVA as a running spread, please?
Am unable to offer too detailed an explanation in this space here, but an approximate formula to calculate CVA as a running spread i.e. CVA expressed as an annual or per annum charge goes as: CVA as running spread = - CDS Spread of Ctpty * avgEPE (%) where avgEPE (%) is in percentage or per dollar terms.
A bit sloppy: @14:41, you do not indicate what is the x axes of the graph ( here it seems to be the V_k ) and what is the y axis. ( here, it seems to be the "probability"). Note, that in the practice, EPE is calculated by simulating the risk factors at t=k, calculating the V_k based on the realisation of the risk factors, then taking the expected value ( average). Thus, EPE = \int_{x_0}^{\infity} V_k(x) f(x) dx. In this graph, the x axis is the risk factor, the y axis is V_k. The density function ( you draw in your graph) is f(x). If V_k ~alpha x, then your graph coincides with mine ( modulo a scaling factor).
@mortenvanlinden567, the graph is the probability distribution of V_k (mentioned at timestamp @06:50). So, the x-axis shows various possible MtM values - negatives shown to the left of 0, positives shown to the right. The y-axis plots the density (pdf).
*FRM Learning Objective* Describe and calculate the following metrics for credit exposure: expected mark-to-market, expected exposure, potential future exposure, expected positive exposure and negative exposure, effective expected positive exposure, and maximum exposure.
so good explanation. better than many a coaching institutions claiming to be number 1
Thank you for this very detailed and clear presentation of the Credit Exposured Metrics !
both this one and the exposure using IR swap are amazing, helped a ton. Thanks.
Extremely cleared explanation! Thank you!
Thanks a lot professor, very valuable information here as I am working to implement these metrics at my job.
Glad it was helpful, Saitom.
Awesome, thank you so much !! So clear and well presented !!
Very clear and Precise - thank you so much!
Beautifully Explained.
Clear and concise! Great help
Very very well explained
nonetheless, the presentation is clear and useful.
That's very helpful. Thank you !
Great video, thank you very much.
awesome explanation
Glad you liked it.
Thanks for the video, very helpful.
Can you explain what you mean by saying that average EPE goes into the calculation of CVA as a running spread, please?
Am unable to offer too detailed an explanation in this space here, but an approximate formula to calculate CVA as a running spread i.e. CVA expressed as an annual or per annum charge goes as:
CVA as running spread = - CDS Spread of Ctpty * avgEPE (%)
where avgEPE (%) is in percentage or per dollar terms.
One lecture for Monte cArlo sim to calculate var pzl
Thanks a lot sir..... :)
A bit sloppy: @14:41, you do not indicate what is the x axes of the graph ( here it seems to be the V_k ) and what is the y axis. ( here, it seems to be the "probability").
Note, that in the practice, EPE is calculated by simulating the risk factors at t=k, calculating the V_k based on the realisation of the risk factors, then taking the expected value ( average).
Thus, EPE = \int_{x_0}^{\infity} V_k(x) f(x) dx.
In this graph, the x axis is the risk factor, the y axis is V_k. The density function ( you draw in your graph) is f(x).
If V_k ~alpha x, then your graph coincides with mine ( modulo a scaling factor).
@mortenvanlinden567, the graph is the probability distribution of V_k (mentioned at timestamp @06:50). So, the x-axis shows various possible MtM values - negatives shown to the left of 0, positives shown to the right. The y-axis plots the density (pdf).
Can someone explain PFE. I did not get it.
thanks,
Very well explained