Research On The Management Of The Counterparty Credit Risk-based On CVA Theory

Risk-free arbitrage theory as an important method of financial derivatives pricing,are widely used by the major international investment banking institutions.However,risk-free arbitrage is not as risky as we thought.Financial institutions can avoid risk of market volatility through risk-free arbitrage strategies.But it cannot avoid the counterparty credit risk(Counterparty Credit Risk,CCR).During the financial crisis,counterparty credit risk,which is mainly present in market activities such as financial derivatives acquisitions,transactions and other securities,is gradually exposed and becomes a market volatility amplifier.Financial risk management as an important means of financial derivatives in the transaction triggered a risk,while the relevant regulatory authorities did not promptly found that eventually lead to the financial crisis to the global economy has far-reaching impact.In recent years,with the deepening of China's financial innovation,Chinese derivatives market is booming and has made great progress.China,which occupies an important share of the global financial derivatives market,should pay enough attention to the impact of counterparty credit risk.After the financial crisis,the Basel Committee on Banking Supervision issued a new Basel agreement,one of the key is to strengthen the counterparty credit risk supervision and measurement.The Basel Committee introduced a new method of credit valuation adjustment in Basel III to reduce the risk between traders and counterparties.Therefore,it is of great practical significance to study the credit risk of counterparty.This paper first studies the relevant theories of counterparty risk,and then studies the relevant measurement method of credit valuation adjustment along the path of improvement of Basel agreement,and analyzes the current situation of credit risk management of counterparty at home and abroad.Then we study the theory of credit valuation and the related properties of Copula function,especially considering the change of credit value adjustment model(CVA)after error risk,and introducing Copula function into it to analyze the relationship between risk exposure and default probability The Impact of Relevance on Credit Estimation.Finally,the relevant influencing factors of credit valuation adjustment with error risk are studied by means of empirical method with interest rate swap(FR007S3).It is concluded that commercial banks should take full account of the important practical significance of the impact of the wrong risk on the adjustment of credit valuation.