Setup >Credit >Obligors >AssetCorrelation

Obligors and Asset Correlation

 

To measure Time-To-Default, you will need to setup obligors. Fortunately, Risksvr™ can generate this data if you haven't provided it yet.

Obligors generation depend on the data you provide:

Obligor-Counterparty One to Many

An obligor can thus be seen as a Group of One or More Counterparties. This architecture helps to make Correlation Definition and computation easier in some instances.

Obligor   Counterparty
 XYZ   XYZ-NYC
  XYZ-LDN 
  ....
   
Maximum .99


The Engine can convert Counterparties to Obligors automatically. 
In this setting, Obligors can either be generated for Each Counterparty or for Each Senior Counterparty. 
If Senior Counterparties are selected, then Junior Counterparties (Subsidiaries) are included in the Group. Although this can make correlation easier to define it is not recommended to users who want to capture Industry Sector/Country Weightings.

 

  Create New Obligor
Name
Full Name
Credit Curve
Specific Risk

 

Difference between Obligors and Party or Accounts

An obligor represents a firm that issued the underlying asset.
Not to be confused with Counterparties. The Credit Risk of the counterparty stems from trades you have carried out directly with the party.
The more profitable these trades become the higher the loss in case of default (provided Collateral is not sufficient and netting does not compensate with other positions)
Obligor credit risk stems from securities issued by the obligor that were (most often) purchased from another counterparty.
There is indeed no collateral or netting scheme. If the obligor defaults he will no longer pay coupons, dividends or reimburse capital and so the value of your asset will most likely end up being worth at best the value recovered once the company is liquidated.

 






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