by Masashi Sekine
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Suggested foundations for credit and counterparty risk and stochastic processes and pricing. Specialist prerequisites vary by paper.
Separate default probability, loss severity and exposure.
Understand what it means to condition on current information.
Follow Brownian dynamics and the second-order term in Itô calculus.
Study dependence between defaults.
Connect exposure and counterparty losses to valuation adjustments.
Connect stochastic dynamics to no-arbitrage prices.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.