An Introduction to Credit VaR (CVaR)
Learn the basics of CVaR in under 5 minutes
The importance of calculating risk
The importance of calculating and managing risks is, hopefully, already apparent to you. Taking too significant and uncontrolled risks can bring financial ruin to any organization. Consequently, organizations must have a way of managing and calculating their risk.
In the financial meltdown of 2007, it became apparent that large investment banking organizations did not have the correct infrastructure in place to monitor and manage their risks correctly, ending up in their demise or adding into the chaos that followed.
The Basics
Before we jump into any more detailed explanations of things, let’s make sure that we all have the same definitions of the various terms.
What is a Counterparty?
A counterparty is defined as the party on the opposite end of a financial contract or transaction.
