An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk
This article presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time rather than the default time itself, as the default...
Ausführliche Beschreibung
Gespeichert in:
| Autor*in: |
Tim Xiao [verfasserIn] |
|---|
| Format: |
Artikel |
|---|---|
| Sprache: |
Englisch |
| Erschienen: |
2015 |
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| Schlagwörter: |
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| Übergeordnetes Werk: |
Enthalten in: The journal of fixed income - London : IPR Journals, 1991, 25(2015), 1, Seite 84 |
|---|---|
| Übergeordnetes Werk: |
volume:25 ; year:2015 ; number:1 ; pages:84 |
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10.3905/jfi.2015.25.1.084 |
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| 520 | |a This article presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy and is relatively easy to implement. The model captures wrong-way or right-way risk naturally. Using a unique dataset, the author finds empirical evidence that wrong- or right-way risk has a material effect on risky valuation and CVA. The magnitude of the impact is greater in credit and equity markets. The results also indicate that diversification is an effective way to mitigate wrong- or right-way risk. | ||
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10.3905/jfi.2015.25.1.084 doi PQ20160617 (DE-627)OLC1959113089 (DE-599)GBVOLC1959113089 (PRQ)p519-efec22c9d9a2a48f8ba9fa33755e89385207b33484a4e7114b8014978f6e2f670 (KEY)0209232820150000025000100084accuratesolutionforcreditvalueadjustmentcvaandwron DE-627 ger DE-627 rakwb eng 330 650 DNB 83.00 bkl Tim Xiao verfasserin aut An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk 2015 Text txt rdacontent ohne Hilfsmittel zu benutzen n rdamedia Band nc rdacarrier This article presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy and is relatively easy to implement. The model captures wrong-way or right-way risk naturally. Using a unique dataset, the author finds empirical evidence that wrong- or right-way risk has a material effect on risky valuation and CVA. The magnitude of the impact is greater in credit and equity markets. The results also indicate that diversification is an effective way to mitigate wrong- or right-way risk. Fixed assets Studies Risk exposure Securities markets Banking industry Enthalten in The journal of fixed income London : IPR Journals, 1991 25(2015), 1, Seite 84 (DE-627)170850188 (DE-600)1116103-6 (DE-576)032733518 1059-8596 nnns volume:25 year:2015 number:1 pages:84 http://dx.doi.org/10.3905/jfi.2015.25.1.084 Volltext http://search.proquest.com/docview/1692910379 GBV_USEFLAG_A SYSFLAG_A GBV_OLC SSG-OLC-WIW GBV_ILN_26 GBV_ILN_40 GBV_ILN_130 GBV_ILN_2002 GBV_ILN_2014 83.00 AVZ AR 25 2015 1 84 |
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This article presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy and is relatively easy to implement. The model captures wrong-way or right-way risk naturally. Using a unique dataset, the author finds empirical evidence that wrong- or right-way risk has a material effect on risky valuation and CVA. The magnitude of the impact is greater in credit and equity markets. The results also indicate that diversification is an effective way to mitigate wrong- or right-way risk. |
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This article presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy and is relatively easy to implement. The model captures wrong-way or right-way risk naturally. Using a unique dataset, the author finds empirical evidence that wrong- or right-way risk has a material effect on risky valuation and CVA. The magnitude of the impact is greater in credit and equity markets. The results also indicate that diversification is an effective way to mitigate wrong- or right-way risk. |
| abstract_unstemmed |
This article presents a new framework for credit value adjustment (CVA) that is a relatively new area of financial derivative modeling and trading. In contrast to previous studies, the model relies on the probability distribution of a default time rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy and is relatively easy to implement. The model captures wrong-way or right-way risk naturally. Using a unique dataset, the author finds empirical evidence that wrong- or right-way risk has a material effect on risky valuation and CVA. The magnitude of the impact is greater in credit and equity markets. The results also indicate that diversification is an effective way to mitigate wrong- or right-way risk. |
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An Accurate Solution for Credit Value Adjustment (CVA) and Wrong Way Risk |
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http://dx.doi.org/10.3905/jfi.2015.25.1.084 http://search.proquest.com/docview/1692910379 |
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10.3905/jfi.2015.25.1.084 |
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