Counterparty credit risk in a multivariate structural model with jumps

Laura Ballotta and Gianluca Fusai

Finance, 2015, vol. 36, issue 1, 39-74

Abstract: We present a multivariate version of a structural default model with jumps and use it in order to quantify the bilateral credit value adjustment and the bilateral debt value adjustment for equity contracts, such as forwards, in a Merton-type default setting. In particular, we explore the impact of changing correlation between names on these adjustments and study the effect of wrong-way and right-way risk.

Date: 2015
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