1) An increase interest in throwing more research into the correlation impact to portfolio defaults.
2) An interest in measuring wrong way risk and creating a charge for this exposure.
3) Building incremental models for CVA when restructuring trades.
4) The construction of a framework for pricing contingent counterparty and credit risk.
5) The chase for RWA data still appears to be on and is often not sufficient to confirm decision making or carryout effective analytics.
6) A move and an increase in the analytical approaches for dimensioning netted EPE rather than MTM models.
7) The creation of models that can infer the effects of negative gamma on a portfolio and how credit risk might be able to be hedged given this position.
8) Creating option type position models for non option instruments to allow streamlining of analytics.
STRATEGIES AND POLICY
9) Introduction of policies to break trades and to pass on liability to other financial institutions if the portfolio exposure has high concentration and projected returns are not in line with a degenerated risk profile.
10) Increase emphasis on default ownership and post recovery policy.
11) Improvements in dimensioning aggregated DSL correlated to implied volatility models, away from market risk but within operations itself -WOW.
12) Less emphasis on rating agencies and an increase in credit exposure assessment by improving models that utilise credit spreads and/or the market price of default protection.
SYSTEMS AND MANAGEMENT
13) A move back to break away from a single system for credit risk reporting and the persistence of Excel 2003 (not the latest version of Microsoft Office) with add-in statistical support remains.
14) Many banks have fragmented and inconsistent counterparty risk measurement systems, there is a change at hand to centralise this function although off system, excel reporting is on the increase.
15) Additionally I am noticing the number of banks who want to build their own quantitative engines seems to be on the rise rather than purchasing a tool from a 3rd party vendor. Big Tier One houses are going internal for solutions.
16) There is a move for automatic and rapid JIT assessment of counterparty trades for all products by connecting the credit analytical / deal clearance systems to front office brokerage and trading platforms.
Front to Bank across all divisions appears to be the drive rather than silo based approaches.
