IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/64647.html
   My bibliography  Save this paper

Exact Methods for Path-Dependent Credit Exposure

Author

Listed:
  • Zhou, Richard

Abstract

Path dependent counterparty credit risk exposure modeling poses challenges. In this paper, we present models for consistent and accurate estimation of counterparty credit exposure involving barrier option and European swaption under the general Monte Carlo simulation framework. In particular, we discuss how to consistently estimate the pathwise swaption exercise probability and accurate monitoring of barrier crossing. We present exact formulation for standalone expected exposure and potential future exposure for swap, swaption and barrier option without monte carlo simulation. The exact formulation is of practical importance to computing standalone exposure profiles, exposure model validation and system benchmarking.

Suggested Citation

  • Zhou, Richard, 2015. "Exact Methods for Path-Dependent Credit Exposure," MPRA Paper 64647, University Library of Munich, Germany, revised 25 May 3025.
  • Handle: RePEc:pra:mprapa:64647
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/64647/1/MPRA_paper_64647.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Counterparty credit exposure; expected exposure; PFE; swap; swaption; barrier option; monte carlo;
    All these keywords.

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:64647. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.