| Valuation of CVA, DVA and BVA of Cash Flows Based on Dependence Between Market Risk and Credit Risk Factors Using Copula Functions |
| کد مقاله : 1030-FEMATH5-FULL |
| نویسندگان |
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داوود احمدیان * دانشگاه تبریز دانشکده ریاضی |
| چکیده مقاله |
| Valuation of the instruments concerned means discounted all the related cash flows with appropriate discount factors. The cash flows consist of (i) the payoffs of the credit sensitive instrument when no default occurs; (ii) the cash flows related to the margining process of collateralization; (iii) default-related cash flows. These cash flows as well as the discount factors depend on various risk drivers. The most important ones are interest rates on the market risk side and probabilities of default (PD) on the credit risk side. PD, in turn, is expressed as probability of default if the default process is considered and credit spread if its effect on market valuation is considered. In our approach assume that interest rate risk and credit risk each depend on a single risk driver. The underlying statistical problem is thus to model the (bivariate) joint distribution of these risk drivers. This will be done by using different copula functions whose parameters will be estimated by historical data using different statistical methods. |
| کلیدواژه ها |
| Credit Valuation Adjustment, Copula Functions, Wrong Way Risk, Collateralization, Probability of Default. |
| وضعیت: پذیرفته شده برای ارائه شفاهی |