We consider counterparty risk for interest rate payoffs in presence of correlation between the default event and interest rates. The previous analysis of Brigo and Masetti (2006), assuming independence, is further extended to interest rate payoffs different from simple swap portfolios. A...

The book's content is focused on rigorous and advanced quantitative methods for the pricing and hedging of counterparty credit and funding risk. The new general theory that is required for this methodology is developed from scratch, leading to a consistent and comprehensive framework for...

We review different theoretical and empirical approaches for measuring the impact of liquidity on CDS prices. We start by reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different...

We develop a tractable partial equilibrium model to analyze the impact on the bond market generated by a ban on naked credit default swaps. We demonstrate that such a ban will have a negligible impact on the borrowing costs if CDS speculators are risk averse and take positions which are small...