We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al. (2011) can be helpful in defining the key market rates underlying the multiple interest rate curves that characterize current interest rate markets. We introduce the collateralized valuation measures and formulate a consistent realistic dynamics for the rates emerging from our analysis. We point out limitations of multiple curve models with deterministic basis considering valuation of particularly sensitive products such as basis swaps.
Impact of multiple curve dynamics in credit valuation adjustments / Bormetti, Giacomo; Brigo, Damiano; Francischello, Marco; Pallavicini, Andrea. - STAMPA. - 165:(2016), pp. 251-266. (Intervento presentato al convegno Innovations in Derivatives Markets—Fixed income modeling, valuation adjustments, risk management, and regulation tenutosi a Munich nel March 30–April 1, 2015) [10.1007/978-3-319-33446-2_12].
Impact of multiple curve dynamics in credit valuation adjustments
BORMETTI, GIACOMO;
2016
Abstract
We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al. (2011) can be helpful in defining the key market rates underlying the multiple interest rate curves that characterize current interest rate markets. We introduce the collateralized valuation measures and formulate a consistent realistic dynamics for the rates emerging from our analysis. We point out limitations of multiple curve models with deterministic basis considering valuation of particularly sensitive products such as basis swaps.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
