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Persistent link: https://www.econbiz.de/10009010628
In this article we expand the semi-replication framework by Burgard and Kjaer to derivative books with multiple counterparties. We then find the funding strategy that corresponds to the recent funding value adjustment accounting proposal by Albanese and Andersen. This strategy is asymmetric and...
Persistent link: https://www.econbiz.de/10012972409
We derive a partial differential equation (PDE) representation for the value of financial derivatives with bilateral counterparty risk and funding costs. The model is very general in that the funding rate may be different for lending and borrowing and the mark-to-market value at default can be...
Persistent link: https://www.econbiz.de/10013069879
Persistent link: https://www.econbiz.de/10009375162