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Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity by Frédéric Patras, Damiano Brigo, Tomasz R. Bielecki

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Chapter 12

CVA Computation for Counterparty Risk Assessment in Credit Portfolios

Samson Assefa

Équipe Analyse et Probabilité, Université d'Évry Val d'Essonne, and CRIS Consortium

Tomasz R. Bielecki

Professor of Applied Mathematics, Illinois Institute of Technology

Stéphane Crépey

Université d'Évry Val d'Essonne and CRIS Consortium

Monique Jeanblanc

Université d'Évry Val d'Essonne, Europlace Institute of Finance, and CRIS Consortium

We first derive a general counterparty risk representation formula for the credit valuation adjustment (CVA) of a netted and collateralized portfolio. This result is then specified to the case, most challenging from the modeling and numerical point of view, of counterparty credit risk. Our general results are essentially ...

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