By Giovanni Cesari,John Aquilina,Niels Charpillon,Zlatko Filipovic,Gordon Lee,Ion Manda

It was once the tip of 2005 while our organisation, a tremendous ecu funding financial institution, gave our workforce the mandate to compute in a correct manner the counterparty credits publicity coming up from unique derivatives traded by way of the ?rm. As usually occurs, - posure of goods equivalent to, for instance, unique interest-rate, or credits derivatives have been modelled below conservative assumptions and credits of?cers have been suffering to evaluate the genuine danger. We began with a couple of types written on spreadsheets, t- lored to very speci?c tools, and shortly it grew to become transparent extra systematic technique was once wanted. So we wrote a few instruments that may be used for a few periods of particularly uncomplicated items. a number of years later we're now within the strategy of construction a method that may be used to alternate and hedge counterparty credits ex- yes in a correct method, for every type of by-product items in all asset sessions. We needed to conquer difficulties starting from modelling in a constant demeanour varied items booked in several structures and construction the best structure that will permit the computation and pricing of credits publicity for every type of pr- ucts, to ?nding the ideal administration constitution throughout enterprise, threat, and IT divisions of the ?rm. during this booklet we describe a few of our adventure in modelling counterparty credits publicity, computing credits valuation changes, settling on applicable hedges, and development a competent system.

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