Morini, Massimo and Prampolini, Andrea (2010): Risky funding: a unified framework for counterparty and liquidity risk.
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Standard techniques for incorporating liquidity costs into the fair value of derivatives produce counter-intuitive results when credit risk of the counterparty (CVA) and of the investor (DVA) are added to the picture. Here, Massimo Morini and Andrea Prampolini show that a consistent framework can only be achieved by giving an explicit representation to the funding strategy, including associated default risks.
|Item Type:||MPRA Paper|
|Original Title:||Risky funding: a unified framework for counterparty and liquidity risk|
|Keywords:||counterparty risk; CVA; DVA; funding; liquidity; bond-CDS basis|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing|
|Depositing User:||Andrea Prampolini|
|Date Deposited:||30. Aug 2010 19:29|
|Last Modified:||11. Feb 2013 16:51|
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Risky funding: a unified framework for counterparty and liquidity risk. (deposited 29. Jun 2010 02:02)
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