A structural approach to pricing credit default swaps with credit and debt value adjustments
Pricing of Securities
2012-06-15 v1 Computational Finance
Risk Management
Abstract
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration problem and backward pricing problem in three dimensions are developed. The model is used to analyze bilateral counterparty risk for credit default swaps and evaluate the corresponding credit and debt value adjustments.
Keywords
Cite
@article{arxiv.1206.3104,
title = {A structural approach to pricing credit default swaps with credit and debt value adjustments},
author = {Alexander Lipton and Ioana Savescu},
journal= {arXiv preprint arXiv:1206.3104},
year = {2012}
}
Comments
17 pages, 9 figures