The recent NBFI defaults & near defaults events (Archegos, LDI crisis, LME Nickel…) brought greater focus on the challenges of modelling CCR exposures for highly leveraged and wrong-way risk counterparties. With this context in mind, we will give an overview of recent methodological advancements, and present two alternative ways to compute realistic stressed exposures with existing Monte Carlo simulation frameworks. In the last part of the seminar, we will venture into unpublished work, and show how we can use these new methods to model tail risk for a whole book of hedge funds and prime brokerage counterparties.
