An Accurate Solution for Credit Valuation Adjustment (CVA) and Wrong Way Risk

Journal of Fixed Incom 25 (1):84-95 (2015)
  Copy   BIBTEX


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.



External links

Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

Similar books and articles

A Merton Model of Credit Risk with Jumps.Hoang Thi Phuong Thao & Quan-Hoang Vuong - 2015 - Journal of Statistics Applications and Probability Letters 2 (2):97-103.
Credit‐default swaps are not to blame.Peter J. Wallison - 2009 - Critical Review: A Journal of Politics and Society 21 (2-3):377-387.
Risk Sensitive Credit.Maura Priest - 2019 - Erkenntnis 84 (3):703-726.
Relative uncertainty in term loan projection models: what lenders could tell risk managers.Lisa Warenski - 2012 - Journal of Experimental and Artificial Intelligence 24 (4):501-511.
Credit risk assessment and meta-judgment.Suzanne Pinson - 1989 - Theory and Decision 27 (1-2):117-133.
Financialisation of Valuation.Eve Chiapello - 2015 - Human Studies 38 (1):13-35.
Ethical Commitments and Credit Market Regulations.Saad Azmat & Hira Ghaffar - 2021 - Journal of Business Ethics 171 (3):421-433.
Model of expatriate adjustment and framework for organisational support.Pranav Naithani - 2009 - Alternative: Journal of Mgmt. Studies and Research 8 (1):34-41.


Added to PP

156 (#82,332)

6 months
18 (#59,258)

Historical graph of downloads
How can I increase my downloads?

Author's Profile

References found in this work

No references found.

Add more references