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Two different probability measures are of importance when calculating the risk of a large portfolio: the risk-neutral measure for pricing, and the real measure to project true earnings. When using Monte Carlo, the natural method is to conduct two different simulations, one in each probability...
Persistent link: https://www.econbiz.de/10005858559
In this paper we develop a structural model of counterparty risk . In particular we provide closed form formulae for the price of risky debt and equity, which depend up on the lending/borrowing relationships in the economy. Our model applies to completely general lender/borrower relationships,...
Persistent link: https://www.econbiz.de/10005858562
This short paper establishes two conditions that allow to verify easily the strongquasi convexity of the objective function in a non linear least -squares problem, thereby the unicity of the minimum over a convex set.
Persistent link: https://www.econbiz.de/10005858577