Brigo, Damiano; Liu, Qing; Pallavicini, Andrea; Sloth, David - arXiv.org - 2014
We develop an arbitrage-free framework for consistent valuation of derivative trades with collateralization, counterparty credit gap risk, and funding costs, following the approach first proposed by Pallavicini and co-authors in 2011. Based on the risk-neutral pricing principle, we derive a...