Chapter 19
The Future of Counterparty Risk
The only thing we know about the future is that it will be different.
Peter Drucker (1909–2005)
At the time of writing, counterparty risk represents one of the hottest topics within the financial markets, and the quantification and management of CVA is receiving much attention. It is also accepted that much work needs to be done in understanding complex components such as wrong-way risks and debt value adjustment (DVA). Areas related to counterparty risk, such as risk-free valuation and funding, are also receiving huge attention. Finally, the impact of mitigating counterparty risk through mechanisms such as hedging and central clearing is being debated. In this final chapter, we consider the key components that will define the subject of counterparty risk and related areas in the future.
