scholarly journals The Valuation of Interest Rate Swap with Bilateral Counterparty Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rate ◽  
Closed Form Solution ◽  
Form Solution ◽  
Reduced Form ◽  
Counterparty Risk ◽  
Interest Rate Swap ◽  
Interest Rate Swaps ◽  
Counterparty Credit Risk ◽  
Form Model ◽  
The Impact

This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals The Valuation of Interest Rate Swap with Bilateral Counterparty Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rate ◽  
Closed Form Solution ◽  
Form Solution ◽  
Reduced Form ◽  
Counterparty Risk ◽  
Interest Rate Swap ◽  
Interest Rate Swaps ◽  
Counterparty Credit Risk ◽  
Form Model ◽  
The Impact

This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals The Valuation of Interest Rate Swap with Bilateral Counterparty Risk

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rate ◽  
Closed Form Solution ◽  
Form Solution ◽  
Reduced Form ◽  
Counterparty Risk ◽  
Interest Rate Swap ◽  
Interest Rate Swaps ◽  
Counterparty Credit Risk ◽  
Form Model ◽  
The Impact

This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Financial Derivatives ◽  
Form Solution ◽  
Reduced Form ◽  
Derivatives Pricing ◽  
Default Time ◽  
Form Model ◽  
The One ◽  
The Impact

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 modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Financial Derivatives ◽  
Form Solution ◽  
Reduced Form ◽  
Derivatives Pricing ◽  
Default Time ◽  
Form Model ◽  
The One ◽  
The Impact

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 modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Financial Derivatives ◽  
Form Solution ◽  
Reduced Form ◽  
Derivatives Pricing ◽  
Default Time ◽  
Form Model ◽  
The One ◽  
The Impact

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 modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

scholarly journals Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

2019 ◽  
Author(s):  
Tim Xiao
Keyword(s):  
Interest Rates ◽  
Closed Form Solution ◽  
Financial Derivatives ◽  
Form Solution ◽  
Reduced Form ◽  
Derivatives Pricing ◽  
Default Time ◽  
Form Model ◽  
The One ◽  
The Impact

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 modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.

ANALYTICAL VALUATION OF VULNERABLE OPTIONS IN A DISCRETE-TIME FRAMEWORK

2016 ◽  
Vol 31 (1) ◽  
pp. 100-120 ◽  
Author(s):  
Xingchun Wang
Keyword(s):  
Discrete Time ◽  
Default Risk ◽  
Closed Form Solution ◽  
Form Solution ◽  
Reduced Form ◽  
Option Prices ◽  
Underlying Asset ◽  
Proposed Model ◽  
Form Model ◽  
Vulnerable Options

In this paper, we present a pricing model for vulnerable options in discrete time. A Generalized Autoregressive Conditional Heteroscedasticity process is used to describe the variance of the underlying asset, which is correlated with the returns of the asset. As for counterparty default risk, we study it in a reduced form model and the proposed model allows for the correlation between the intensity of default and the variance of the underlying asset. In this framework, we derive a closed-form solution for vulnerable options and investigate quantitative impacts of counterparty default risk on option prices.

PRICING COUNTERPARTY RISK INCLUDING COLLATERALIZATION, NETTING RULES, RE-HYPOTHECATION AND WRONG-WAY RISK

2013 ◽  
Vol 16 (02) ◽  
pp. 1350007 ◽  
Author(s):  
DAMIANO BRIGO ◽  
AGOSTINO CAPPONI ◽  
ANDREA PALLAVICINI ◽  
VASILEIOS PAPATHEODOROU
Keyword(s):  
Interest Rate ◽  
Credit Derivatives ◽  
Credit Default Swaps ◽  
Credit Spread ◽  
Counterparty Risk ◽  
Default Correlation ◽  
Dynamical Models ◽  
Credit Default ◽  
The Impact

This article is concerned with the arbitrage-free valuation of bilateral counterparty risk through stochastic dynamical models when collateral is included, with possible rehypothecation. The payout of claims is modified to account for collateral margining in agreement with International Swap and Derivatives Association (ISDA) documentation. The analysis is specialized to interest-rate and credit derivatives. In particular, credit default swaps are considered to show that a perfect collateralization cannot be achieved under default correlation. Interest rate and credit spread volatilities are fully accounted for, as is the impact of re-hypothecation, collateral margining frequency, and dependencies.

scholarly journals On the impact of antenna diversity in IEEE 802.11b DCF with capture

2004 ◽  
Vol 17 (1) ◽  
pp. 41-52
Author(s):  
Zoran Velkov-Hadzi ◽  
Boris Spasenovski
Keyword(s):  
Closed Form ◽  
Closed Form Solution ◽  
Access Point ◽  
Form Solution ◽  
Capture Probability ◽  
Antenna Diversity ◽  
Ieee 802.11B ◽  
Selection Diversity ◽  
Maximum Selection ◽  
The Impact

In this paper, we examined the influence of capture effect with L-fold antenna diversity at the Access Point over IEEE 802.11b DCF. We obtained an exact closed-form solution for the conditional capture probability in case of ideal selection diversity, and an approximate closed-form solution for the conditional capture probability in case of maximum selection diversity in a Rayleigh-faded channel. Obtained analytical expressions have general significance and can be applied for any other multiple access wireless network. We also analytically evaluated saturation throughput increase of the IEEE 802.11b DCF protocol exposed to capture.

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