An Efficient, Distributable, Risk Neutral Framework for CVA Calculation

18 Pages Posted: 3 Oct 2010

See all articles by Dongsheng Lu

Dongsheng Lu

The Bank of New York Mellon

Frank Juan

JP Morgan Chase

Date Written: September 28, 2010

Abstract

The importance of counterparty credit risk to the derivative contracts was demonstrated consistently throughout the financial crisis of 2008. Accurate valuation of Credit value adjustment (CVA) is essential to reflect the economic values of these risks. In the present article, we reviewed several different approaches for calculating CVA, and compared the advantage and disadvantage for each method. We also introduced an more efficient and scalable computational framework for this calculation.

Keywords: Counterparty credit risk, CVA, numerical computation

Suggested Citation

Lu, Dongsheng and Juan, Frank, An Efficient, Distributable, Risk Neutral Framework for CVA Calculation (September 28, 2010). Available at SSRN: https://ssrn.com/abstract=1684117 or http://dx.doi.org/10.2139/ssrn.1684117

Dongsheng Lu

The Bank of New York Mellon ( email )

One Wall Street
New York, NY 10286
United States

Frank Juan (Contact Author)

JP Morgan Chase ( email )

London
United Kingdom

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