European claim. This allows pricing and hedging under the minimal martingale measure, corresponding to the local risk …This paper examines a simple basis risk model based on correlated geometric Brownian motions. We apply quadratic … criteria to minimize basis risk and hedge in an optimal manner. Initially, we derive the Föllmer–Schweizer decomposition for a …

We examine the efficiency of hedging a credit derivative portfolio with a contrary position in a credit index in the … volatility are high. Increases in VIX, in the 10-year swap rate or in liquidity risk tend to decrease hedging efficiency … that the calculation of the capital charge for CVA risk, as required by the Basel Committee on Banking Supervision, is …

, the implied adjustments in capital charges could be reduced by hedging a credit derivative portfolio with a contrary …The calculation of the capital charge for CVA risk, as required by the Basel Committee on Banking Supervision, is … CDSs and CDS indices, and we also evaluate the level of basis risk still remaining under the hedge. We address several …