Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/198046 
Authors: 
Year of Publication: 
2015
Citation: 
[Journal:] The Journal of Fixed Income [ISSN:] 1059-8596 [Volume:] 25 [Issue:] 1 [Publisher:] IPR Journals [Place:] London [Year:] 2015 [Pages:] 84-95
Publisher: 
IPR Journals, London
Abstract: 
This paper presents a Least Square Monte Carlo approach for accurately calculating credit value adjustment (CVA). In contrast to previous studies, the model relies on the probability distribution of a default time/jump rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy with a relatively easy implementation. We find that the valuation of a defaultable derivative is normally determined via backward induction when their payoffs could be positive or negative. Moreover, the model can naturally capture wrong or right way risk.
Subjects: 
credit value adjustment (CVA)
wrong way risk
right way risk
credit risk modeling
least square Monte Carlo
default time approach (DTA)
default probability approach (DPA)
collaterilization
margin and netting
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)
Appears in Collections:

Files in This Item:
File
Size
572.57 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.