Quantum algorithm for credit valuation adjustments

Credit , funding , margin , and capital valuation adjustments for bilateral portfolios

We apply to the concrete setup of a bank engaged into bilateral trade portfolios the XVA theoretical framework of Albanese and Crépey (2017), whereby so-called contra-liabilities and cost of capital are charged by the bank to its clients, on top of the fair valuation of counterparty risk, in order to account for the incompleteness of this risk. The transfer of the residual reserve credit capita...

Credit lines and leverage adjustments

Article history: Received 11 June 2012 Received in revised form 19 December 2013 Accepted 20 December 2013 Available online 28 December 2013 Adjustment costs play a prominent role in explanations of capital structure, but the extent of their economic importance is unknown. A credit line has institutional features important for this analysis, notably its sunk costs of access to the debt market, ...

Credit Swap Valuation

This review of the pricing of credit swaps, a form of derivative security that can be viewed as default insurance on loans or bonds, begins with a description of the credit swap contract, turns to pricing by reference to spreads over the risk-free rate of par floating-rate bonds of the same quality, and then considers model-based pricing. The role of asset swap spreads as a reference for pricin...

Credit Valuation Adjustment

Credit risk has become a topical issue since the 2007 Credit Crisis, particularly for its impact on the valuation of OTC derivatives. This becomes critical when the credit risk of entities involved in a contract either as underlying or counterparty become highly correlated as is the case during macroeconomic shocks. It impacts the valuation of such contracts through an additional term, the cred...

Valuation of Credit Default Swaptions and Credit Default Index Swaptions