The authors propose a reduced-form model in which the evolution of the risk-neutral hazard rate is driven by three risk factors.
BofA quant’s model considers the correlation between market shocks and counterparty defaults
Move could bring margin for cleared CDS closer to bilateral trades, but mismatch remains
Fabio Mercurio and Minqiang Li investigate CVAs in the presence of wrong-way risk
Concern that historical price series volatility will not reflect jump-to-default risk
Charge was felt to be "too difficult to capture" without complex rules
Term structure of interest rates explained with a credit model
King's College professor of finance Damiano Brigo says regulators should clamp down on dealers looking to hedge debit value adjustment gains by selling CDS protection on closely correlated names