Weighting for leverage
A credit exposure model for leveraged collateralised counterparties is presented
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The default of Archegos Capital Management in March 2021 resulted in losses an order of magnitude higher than the ones predicted by conventional credit exposure models. Michael Pykhtin presents a model for calculating credit exposure to leveraged collateralised counterparties that can be implemented easily in the existing exposure simulation framework, and he extends the expected exposure scaling approach for calculating expected exposure in the presence of initial
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