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Non-Linear Discounting and Default Compensation: Valuation of Non-Replicable Value and Damage: When the Social Discount Rate may become Negative
Christian P. Fries
credit risk / mathematical financeResource overview

Non-Linear Discounting and Default Compensation: Valuation of Non-Replicable Value and Damage: When the Social Discount Rate may become Negative

Paper2020

by Christian P. Fries

Tags
credit riskmathematical finance

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Suggested foundations for credit and counterparty risk and options and derivatives pricing. Specialist prerequisites vary by paper.

Before you read

  1. Credit Instruments, PD/LGD/EAD, and Rating Migration

    Separate default probability, loss severity and exposure.

  2. Conditional Expectation

    Read conditional default and exposure quantities.

  3. The Binomial Model

    Build replication and risk-neutral probabilities in a tractable model.

  4. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

Go further

  1. Threshold Models and the Gaussian Copula for Portfolio Default

    Study dependence between defaults.

  2. CVA and DVA

    Connect exposure and counterparty losses to valuation adjustments.

  3. The Black-Scholes PDE, Formula and Implied Volatility

    Connect the pricing equation, closed-form value and implied volatility.

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