We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic loss models capable of calibrating all the tranches for all...

The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of...

The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe the market of interest rate products. On the other hand,...

The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustment (CVA) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of...

This paper generalizes the framework for arbitrage-free valuation of bilateral counterparty risk to the case where collateral is included, with possible re-hypotecation. We analyze how the payout of claims is modified when collateral margining is included in agreement with current ISDA...

We extend the common Poisson shock framework reviewed for example in Lindskog and McNeil (2003) to a formulation avoiding repeated defaults, thus obtaining a model that can account consistently for single name default dynamics, cluster default dynamics and default counting process. This approach...

For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and accommodate basis-swap spreads, whose remarkable widening...

We extend the common Poisson shock framework reviewed for example in Lindskog and McNeil [15] to a formulation avoiding repeated defaults, thus obtaining a model that can account consistently for single name default dynamics, cluster default dynamics and default counting process. This approach...

After a brief review of the literature on rating arbitrage for corporate and structured nance, we introduce the standard criteria adopted by rating agencies to assess riskiness of Constant Proportion Debt Obligations (CPDO). Then, we propose a new rating model in order to incorporate a more...

We illustrate a problem in the self-financing condition used in the papers "Funding beyond discounting: collateral agreements and derivatives pricing" (Risk Magazine, February 2010) and "Partial Differential Equation Representations of Derivatives with Counterparty Risk and Funding Costs" (The...