Starting from the Merton framework for firm defaults, we provide the analytics and robustness of the relationship between default correlations. We show that loans with higher default probabilities will not only have higher variances but also higher correlations between loans. As a consequence,...

Starting from the Merton framework for firm defaults, we provide the analytics and robustness of the relationship between default correlations. We show that loans with higher default probabilities will not only have higher variances but also higher correlations between loans. As a consequence,...

We study the optimal loan securitization policy of a commercial bank which is mainly engaged in lending activities. For this we propose a stylized dynamic model which contains the main features affecting the securitization decision. In line with reality we assume that there are non-negligible...

XVA models for the calculation of CVA, FVA (see for example (Burgard and Kjaer 2013)), KVA(Green, Kenyon, and Dennis 2014), MVA (Green and Kenyon 2014) and TVA (Kenyon and Green 2014a) have frequently been formulated at the counterparty level. However, it is clear that some elements of the...