On measuring credit risks of derivative instruments

Article Abstract:

Flaws in the standard approach for measuring credit risks of derivative instruments can yield large errors in the estimation of distributions of future credit exposures as well as future credit losses. One major flaw is its use of models of the stochastic behavior of financial variables while failing to take into account their inherent oversimplication and the uncertainty in their parameters. Another is its exclusion of the correlations among exposures on derivative instruments and the probabilities of counterparty default.

Derivatives (Financial instruments), Swaps (Finance)

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The value of recourse and cross-default clauses in commercial mortgage contracting

Article Abstract:

The impact of recourse and cross-default clauses on commercial mortgage value is analyzed. These clauses are important because of their diversification benefits in the form of additional assets as collateral attached to the mortgage contract. The lender can lessen default frequency and severity through diversification in the mortgage contract. This is in contrast to the single-asset, non-recourse mortgage contract.

Mortgage-backed securities, Mortgage backed securities

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On the way to recovery: a nonparametric bias free estimation of recovery rate densities

Article Abstract:

A method of estimating and analyzing recovery rates on defaulted bonds as mentioned in the Standard and Poors/PMD database for the years 1981-1999 is discussed.

United States, Bonds, Bonds (Securities)

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