Counterparty risk and funding: immersion and beyond

Stéphane Crépey () and Shiqi Song ()
Additional contact information
Stéphane Crépey: LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - INRA - Institut National de la Recherche Agronomique - ENSIIE - Ecole Nationale Supérieure d'Informatique pour l'Industrie et l'Entreprise - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique
Shiqi Song: LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - INRA - Institut National de la Recherche Agronomique - ENSIIE - Ecole Nationale Supérieure d'Informatique pour l'Industrie et l'Entreprise - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique

Working Papers from HAL

Abstract: In Crépey [9], a basic reduced-form counterparty risk modelling approach was introduced under a standard immersion hypothesis between a reference filtration and the filtration progressively enlarged by the default times of the two parties. This basic setup, with a related continuity assumption on some of the data at the first default time of the two parties, is too restrictive for wrong-way and gap risk applications, such as counterparty risk on credit derivatives. This paper introduces an extension of the basic approach, implements it through marked default times and applies it to counterparty risk on credit derivatives.

Keywords: Counterparty risk; Funding; BSDE; Reduced-form credit modelling; Immersion; Wrong-way risk; Gap risk; Collateral; Credit derivatives (search for similar items in EconPapers)
Date: 2018-04-11
New Economics Papers: this item is included in nep-ban and nep-rmg
Note: View the original document on HAL open archive server: https://hal.science/hal-01764403v1
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hal.science/hal-01764403v1/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-01764403

Access Statistics for this paper

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