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Risk-neutral valuation under differential funding costs, defaults and collateralization
Andrea Pallavicini / Cristin Buescu / Damiano Brigo / Marco Francischello / Marek Rutkowski
credit risk / mathematical financeResource overview

Risk-neutral valuation under differential funding costs, defaults and collateralization

Paper2018

by Andrea Pallavicini, Cristin Buescu, Damiano Brigo, Marco Francischello, Marek Rutkowski

Tags
credit riskmathematical finance

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

Before you read

  1. The Binomial Model

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

  2. Market Model and Risk-Neutral Valuation

    Distinguish pricing probabilities from physical forecasts.

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

    Separate default probability, loss severity and exposure.

  4. Conditional Expectation

    Read conditional default and exposure quantities.

Go further

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

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

  2. Threshold Models and the Gaussian Copula for Portfolio Default

    Study dependence between defaults.

  3. CVA and DVA

    Connect exposure and counterparty losses to valuation adjustments.

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Lesson links open public previews. Access to full lessons depends on the topic and your membership.

Explore Derivatives Pricing and Computational Finance Explore Counterparty Credit Risk and CVA

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