Reducing the number of factors in a model by reducing the rank of a correlation matrix is a problem that often arises in finance, for instance in pricing interest rate derivatives with Libor market models. A simple iterative algorithm for correlation rank reduction is introduced, the eigenvalue...

In the absence of a universally accepted procedure for the credit valuation adjustment (CVA) calculation, we compare a number of different bilateral counterparty valuation adjustment (BVA) formulas. First we investigate the impact of the choice of the closeout convention used in the formulas....