Counterparty Risk Valuation: A Marked Branching Diffusion Approach

Pierre Henry-Labordere ()
Additional contact information
Pierre Henry-Labordere: SOCIETE GENERALE - Equity Derivatives Research Societe Generale - Société Générale

Working Papers from HAL

Abstract: The purpose of this paper is to design an algorithm for the computation of the counterparty risk which is competitive in regards of a brute force ''Monte-Carlo of Monte-Carlo" method (with nested simulations). This is achieved using marked branching diffusions describing a Galton-Watson random tree. Such an algorithm leads at the same time to a computation of the (bilateral) counterparty risk when we use the default-risky or counterparty-riskless option values as mark-to-market. Our method is illustrated by various numerical examples.

Keywords: Counterparty risk valuation; BSDE; branching diffusions; semi-linear PDE; Galton-Watson tree (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cmp and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-00677348
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in 2012

Downloads: (external link)
https://hal.science/hal-00677348/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-00677348

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().