We consider the valuation and risk management of derivatives on defaultable assets such as bonds taking into account funding (FVA), cash collateral, underlying default, counterparty default (CVA) and default correlation using joint default poisson process. The framework can be considered as an...

In this note we consider a classical term structure model framework, that is, a HJM framework on a time-discrete tenor, like the LIBOR market model, using a sequence of tenor discretization, where the tenors are valid for a specific simulation time interval.The setup then allows to model dynamic...

With the realization in the markets and the regulatory world that Interbank Offered Rates (IBORs) may not be as stable and robust as necessary to represent sustainable, global interest rate benchmarks, the search for alternatives has led to (secured or unsecured) overnight rates. The question of...

Computational parsimony makes reduced factor LIBOR market models popular among practitioners. However, value functions and sensitivities of such models are described by degenerate parabolic (i.e. semi-elliptic) equations where the existence of regular global solutions is not trivial. In this...

In this note we discuss the definition, construction, interpolation and application of curves.We will discuss discount curves, a tool for the valuation of deterministic cash-flows and forward curves, a tool for the valuation of linear cash-flows of (possibly) stochastic indices.The aim of this...

We consider a classical term structure model framework, ie, a Heath–Jarrow–Morton framework, on a time-discrete tenor, such as the London Interbank Offered Rate market model, using a sequence of tenor discretizations, where the tenors are valid for a specific simulation time interval. At...

In this paper we discuss interest rate curve interpolation methods and their properties in the context of financial applications. We review the modern (multi-curve) theory of interest rate curve modeling, taking into account collateralization. Building on this solid foundation we reconsider...