Abstract
The collapse of Lehman has acted as a sharp reminder that financial modeling is about modeling PnL treasury shift. Indeed, holding financial products with Lehman as a counterparty can create a loss if our exposure is positive to Lehman at the time of default. This situation has created the need to follow the CVA (credit value adjustment — a measure of counterparty risk). How much should I adjust my price to reflect the possibility of my counterparty defaulting? There is also a symmetrical notion that is the DVA (debit value adjustment) which constitutes the answer to the damage my own default can create for my counterparties.
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© 2015 Adil Reghai
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Reghai, A. (2015). Discounting and General Value Adjustment Techniques. In: Quantitative Finance. Applied Quantitative Finance series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137414502_8
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DOI: https://doi.org/10.1057/9781137414502_8
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-49028-8
Online ISBN: 978-1-137-41450-2
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