Credit Valuation Adjustment with Replacement Closeout: Theory and Algorithms

@article{Sun2022CreditVA,
  title={Credit Valuation Adjustment with Replacement Closeout: Theory and Algorithms},
  author={Chaofan Sun and Ken Seng Tan and Wei Wei},
  journal={SSRN Electronic Journal},
  year={2022}
}
The replacement closeout convention has drawn more and more attention since the 2008 financial crisis. Compared with the conventional risk-free closeout, the replacement closeout convention incorporates the creditworthiness of the counterparty and thus providing a more accurate estimate of the Mark-to-market value of a financial claim. In contrast to the risk-free closeout, the replacement closeout renders a nonlinear valuation system, which constitutes the major difficulty in the valuation of… 

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