Counterparty Risk under Basel III

• Thesis title in Czech: Counterparty Risk under Basel III
• Thesis title in English: Counterparty Risk under Basel III
• Key words: Basel III, kreditní riziko protistrany, centrální protistrana, expozice, bankovní kapitál
• English key words: Basel III, counterparty credit risk, central counterparty, exposure, banking capital
• Academic year of topic announcement: 2010/2011
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: prof. PhDr. Petr Teplý, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 06.06.2011
• Date of assignment: 06.06.2011
• Date and time of defence: 26.06.2013 00:00
• Venue of defence: IES
• Date of electronic submission: 16.05.2013
• Date of proceeded defence: 26.06.2013
• Opponents: PhDr. Mgr. Milan Rippel

References

1.Bluhm, C., L. Overbeck and C. Wagner (2003) An Introduction to Credit Risk Modeling, Chapman & Hall.
2.Gregory, J. (2010) Counterparty Credit Risk: The New Challenge for Global Financial Markets, First Edition, John Wiley & Sons Ltd.
3.Hills, B., F. Rule, S. Parkinson and C.Young (1999) “Central counterparty clearing houses and financial stability,” Bank of England Financial Stability Review, June, 122-133.
4.King, P. and T. Heath (2011) “Basel III: An Overview,” Banking & Financial Services Policy Report, May, 30(5), 1-18.
5.Pirrong, C. (2009) The Economics of Clearing in Derivatives Markets: Netting, Asymmetric Information, and the Sharing of Default Risks through a Central Counterparty. Available at: SSRN: http://ssrn.com/abstract=1340660

Preliminary scope of work

Kreditní riziko protistrany se ukázalo být hlavním zdrojem ztrát během nedávné finanční krize a proto je velmi důležité se jím úspěšně zabývat. Nedostatek Baselu I a II ležel v ohodnocení kreditního rizika, které bylo založeno na modelu nazvaném Value at Risk. Toto ohodnocení dovolovalo bankám použít nižší kapitálové požadavky a také ohodnocení různých aktiv jako více likvidních, a tedy méně rizikových. Tento způsob byl chybný a proto jsme byli svědky například pádu Lehman Brothers. V mé práci se budu snažit adresovat tento náročný problém a vypátrat implikace, které bude mít nová regulace Basel III na kreditní riziko.

Preliminary scope of work in English

The counterparty credit risk proved to be one of the leading sources of losses during the recent financial crisis and thus it is of great importance to deal with it successfully. The shortcoming of Basel I and II was the estimation of counterparty risk, which was based on a computation technique called Value at Risk. The estimation allowed banks to use lower capital charge and also it assessed various assets to be more liquid, hence less risky. This assessment was wrong and so we witnessed for instance the fall of Lehman Brothers. In my thesis I will try to address this challenging problem and investigate the implications that the new regulation rules of Basel III will have on counterparty risk.