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Credit Valuation Adjustment in Financial Networks [PDF]
SSRN Electronic Journal, 2023 Credit Valuation Adjustment captures the difference in the value of derivative contracts when the counterparty default probability is taken into account. However, in the context of a network of contracts, the default probability of a direct counterparty can depend substantially on the default probabilities of indirect counterparties. We develop a model
Irena Barjašić +2 more
semanticscholar +9 more sources
Credit Valuation Adjustment Compression by Genetic Optimization [PDF]
Risks, 2019 Since the 2008−2009 financial crisis, banks have introduced a family of X-valuation adjustments (XVAs) to quantify the cost of counterparty risk and of its capital and funding implications.
Marc Chataigner, Stéphane Crépey
doaj +6 more sources
An Accurate Solution for Credit Valuation Adjustment (CVA) and Wrong Way Risk [PDF]
SSRN Electronic Journal, 2019 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.
Tim Xiao
semanticscholar +23 more sources
Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment [PDF]
SSRN Electronic Journal, 2019 The one-side defaultable financial derivatives valuation problems have been studied extensively, but the valuation of bilateral derivatives with asymmetric credit qualities is still lacking convincing mechanism. This paper presents an analytical model for valuing derivatives subject to default by both counterparties. The default-free interest rates are
Tim Xiao
semanticscholar +13 more sources
Leveraging Bayesian Quadrature for Accurate and Fast Credit Valuation Adjustment Calculations
MathematicsCounterparty risk, which combines market and credit risks, gained prominence after the 2008 financial crisis due to its complexity and systemic implications.
Noureddine Lehdili +2 more
doaj +4 more sources
Interactions of Logistic Distribution to Credit Valuation Adjustment: A Study on the Associated Expected Exposure and the Conditional Value at Risk [PDF]
Mathematics, 2022 In Basel III, the credit valuation adjustment (CVA) was given, and it was discussed that a bank covers mark-to-market losses for expected counterparty risk with a CVA capital charge. The purpose of this study is threefold. Using the logistic distribution,
Yanlai Song +3 more
doaj +3 more sources
Credit Valuation Adjustment with Replacement Closeout: Theory and Algorithms [PDF]
SSRN Electronic Journal, 2022 The replacement closeout convention has drawn more and more attention since the 2008 financial crisis. Compared with the conventional risk-free closeout, the replacement closeout convention incorporates the creditworthiness of the counterparty and thus providing a more accurate estimate of the Mark-to-market value of a financial claim.
Chaofan Sun, Ken Seng Tan, Wei Wei
semanticscholar +8 more sources
Bilateral Credit Valuation Adjustment for Large Credit Derivatives Portfolios [PDF]
Finance and Stochastics, 2013 We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities. We perform the analysis under a doubly stochastic intensity framework, allowing for default correlation through a common jump process.
Lijun Bo, Agostino Capponi
semanticscholar +9 more sources
An Analytical Expression for Credit Valuation Adjustment Pricing with Wrong-Way Risk [PDF]
Economics, 2021 Recently, financial institutions were required to provide the financial derivatives instrument level credit valuation adjustment (CVA) by the new accounting standard. CVA trading desks are facing difficulties to calculate a netting-set level CVA with wrong-way risk (WWR) since the dynamics of the exposures and probability of default (PD) are separated ...
Kelin Pan, Chandra Khandrika
semanticscholar +3 more sources
Quantum algorithm for credit valuation adjustments
New Journal of Physics, 2022 Quantum mechanics is well known to accelerate statistical sampling processes over classical techniques. In quantitative finance, statistical samplings arise broadly in many use cases.
Javier Alcazar +6 more
doaj +4 more sources