Credit Valuation Adjustment for Interest Rate Swap with Counterparty Credit Risk in the Local Volatility LM Model

• Main Authors: CHENG, YA FANG, 鄭雅方
• Other Authors: CHANG, YI PING
• Format: Others
• Language: zh-TW
• Published: 2014
• Online Access: http://ndltd.ncl.edu.tw/handle/xdgb22

碩士 === 東吳大學 === 財務工程與精算數學系 === 102 === The Basel III Accord will counterparty credit risk (CCR) to adjust the value called credit valuation adjustment (CVA). Recent literatures suggest that investor and counterparty may default, and therefore the bilateral counterparty credit risk (BCCR) is proposed. Under the base of BCCR, the adjustment to the net present value is called bilateral credit valuation adjustment (BCVA). This article consider a constant elasticity of variance (CEV) of the LM model which is proposed by Andersen and Andreasen (2000), and is called CEV-LM model. In this article, the value of the credit valuation adjustment for IRS with bilateral counterparty credit risk in the CEV-LM model. The situational analysis, default correlation, different contract maturities and the beginning of the volatility will affect bilateral credit valuation adjustment for interest rate swap. However, when the beginning of the volatility about the same, bilateral credit valuation adjustment for interest rate swap in different local volatility model is not affected.