by Johan G. Duyvesteyn, Martin P.E. Martens
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Suggested foundations for credit and counterparty risk and volatility models and surfaces. Specialist prerequisites vary by paper.
Separate default probability, loss severity and exposure.
Read conditional default and exposure quantities.
Follow diffusion-based models and their assumptions.
Separate conditional volatility from observed returns.
Study dependence between defaults.
Connect exposure and counterparty losses to valuation adjustments.
Study a correlated stochastic-variance model.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.