Default Forecasting and Credit Valuation Adjustment

David Lee

MPRA Paper from University Library of Munich, Germany

Abstract: Credit valuation adjustment has acquired a great deal of attention from both theoreticians and practitioners in recent years. This paper presents a model for default forecasting and credit valuation adjustment. The model links distance-to-default, default probability, survival probability, default correlation, and risky valuation together. It captures default risk, credit migration, and wrong way risk simultaneously and naturally. The numerical study shows that the model implied credit spreads and default correlations are very close to the market observed ones, indicating that the model performs quite well. The results may be of interest to regulators, academics, and practitioners.

Keywords: credit value adjustment (CVA); credit risk modeling; distance to default; default probability; survival probability; asset pricing involving credit risk. (search for similar items in EconPapers)
JEL-codes: C15 C53 E37 G12 G13 G17 G24 (search for similar items in EconPapers)
Date: 2023-09-12
New Economics Papers: this item is included in nep-ban, nep-ger and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/118578/1/DefaultRiskCVA.pdf original version (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:pra:mprapa:118578

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().