by Isidro Moroso Varona, Jakub Michańków, Paweł Sakowski
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Suggested foundations for credit and counterparty risk and options and derivatives pricing. Specialist prerequisites vary by paper.
Separate default probability, loss severity and exposure.
Read conditional default and exposure quantities.
Build replication and risk-neutral probabilities in a tractable model.
Distinguish pricing probabilities from physical forecasts.
Study dependence between defaults.
Connect exposure and counterparty losses to valuation adjustments.
Connect the pricing equation, closed-form value and implied volatility.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.