Journal of Credit Risk

The pricing implications of counterparty risk for non-linear credit products

Stuart M. Turnbull


We describe a methodology for deriving the upper and lower profit and loss (P&L) bounds in the presence of counterparty risk that does not rely on either structural or reduced-form credit models. The methodology provides practitioners and regulators with a practical tool to estimate the impact on P&L of the two facets of counterparty risk: failure to perform and mark-to-market exposure. We show that for many applications, the bounds are tight and the creditworthiness of counterparties can have a major impact on the P&L.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here