In this work we are introducing a risk neutral valuation formula for counterparty default risk adjustments in an unilateral and in a bilateral case. In the unilateral case the adjustment is represented by a Credit Valuation Adjust- ment(CVA) and in the bilateral case the adjustment is quantified by a Bilateral Risk Adjustment(BVA). We are incorporating these adjustments into the values of zero coupon bonds, coupon bearing bonds and interest rate swaps. For such an incorporation, risk neutral default probabilities extracted from the market quotes of Credit Default Swaps are needed. A Bootstrap method is used to derive them and a reduced form approach is used to model the default times. In the practical part, we are calculating Greek and Czech risk neutral default probabilities during the years 2008-2010. We are calculating CVA for 18 quoted Greek government bonds and we are comparing the adjusted prices with the market quoted prices of these bonds. We study the impact of a risk free interest rate curve choice on such a valuation. In the last sections, we construct an interest rate swap between the Czech and the Greece. We compute and study CVA and BVA for this interest rate swap.

The financial stability of the insurers is important to fulfil its role as a risk transfer mechanism and to protect the purchasers of their products. The European Union is introducing the Solvency II to modernise the current Solvency I regime and to harmonise the different insurance legislation of the members of the European Union. Solvency II introduces an architecture consisting of three pillars, with Pillar I setting the solvency capital requirements, Pillar II the governance and risk management requirements and Pillar III the reporting requirements. The South African Regulator initiated Solvency Assessment and Management for implementation in 2016 to align the South African prudential regulatory framework to meet the Solvency II requirements for third country equivalence. The problem that this study addressed is the possible effect that the introduction of Solvency Assessment and Management may have on the sustainability of short-term insurers in South Africa. The results of a empirical component of the study indicated that small and medium short-term insurers may be negatively impacted due to the costs incurred to implement and comply with the requirements of the new regulatory framework. The effect on the South African short-term industry can be that cover is concentrated among a few large short-term insurers. / Business Management / M. Com. (Business Management)

The financial stability of the insurers is important to fulfil its role as a risk transfer mechanism and to protect the purchasers of their products. The European Union is introducing the Solvency II to modernise the current Solvency I regime and to harmonise the different insurance legislation of the members of the European Union. Solvency II introduces an architecture consisting of three pillars, with Pillar I setting the solvency capital requirements, Pillar II the governance and risk management requirements and Pillar III the reporting requirements. The South African Regulator initiated Solvency Assessment and Management for implementation in 2016 to align the South African prudential regulatory framework to meet the Solvency II requirements for third country equivalence. The problem that this study addressed is the possible effect that the introduction of Solvency Assessment and Management may have on the sustainability of short-term insurers in South Africa. The results of a empirical component of the study indicated that small and medium short-term insurers may be negatively impacted due to the costs incurred to implement and comply with the requirements of the new regulatory framework. The effect on the South African short-term industry can be that cover is concentrated among a few large short-term insurers. / Business Management / M. Com. (Business Management)