We derive a closed-form expression for the bilateral credit valuation adjustment of a credit default swap in presence of simultaneous defaults. We develop our analysis under a default intensity model specified by a class of three-dimensional subordinators, allowing for default dependence through...

The computation of the bilateral counterparty valuation adjustment for a credit default swap (CDS) contract is in effect the modeling of the default dependence among the investor, the protection seller, and the reference entity. We present a contagion model, where defaults of three parties are...

Price of a financial derivative with unilateral counterparty credit risk equals to the price of an otherwise risk-free derivative minus a credit value adjustment (CVA) component, which can be seen as a call option on investor's NPV with strike 0. Thus modeling volatility of NPV is the foundation...

A new, very efficient and fairly simple simulation method for European basket and Asian options under the geometric Brownian motion assumption is presented. It is based on a new control variate method that uses the closed form of the expected payoff conditional on the assumption that the...

We develop a new method to sample from posterior distributions in hierarchical models without using Markov chain Monte Carlo. This method, which is a variant of importance sampling ideas, is generally applicable to high-dimensional models involving large data sets. Samples are independent, so...

The contribution of this paper is twofold. First, it presents the results of a “history-friendly” simulation model of evolution of the pharmaceutical industry. Second, it aims at contributing to a more general methodological discussion about agent-based models by proposing an econometric...

This special issue of the Journal of Economics and Statistics is devoted to the use of agent-based models for economic policy advice. It presents a collection of research papers in different fields of applications. Special emphasis is laid on discussing the potential and possible limitations of...

This chapter explores the state of the emerging practice of designing markets by the use of agent-based modeling, with special reference to electricity markets and computerized (on-line) markets, perhaps including real-life electronic agents as well as human traders. The paper first reviews the...

We develop an empirical search-matching model which is suitable for analyzing the wage, employment and welfare impact of regulation in a labor market with heterogeneous workers and jobs. To achieve this we develop an equilibrium model of wage determination and employment which extends the...

We employ Monte Carlo analysis to determine the distribution of returns for various electricity generation technologies. Costs and revenues for each technology are calculated by means of a unit commitment and economic dispatch algorithm at hourly resolution. This represents a considerable...