• Corpus ID: 6577041

Finance and Economics Discussion Series Divisions of Research & Statistics and Monetary Affairs Federal Reserve Board , Washington , D . C . Derivatives Pricing under Bilateral Counterparty Risk

@inproceedings{Carr2015FinanceAE,
  title={Finance and Economics Discussion Series Divisions of Research \& Statistics and Monetary Affairs Federal Reserve Board , Washington , D . C . Derivatives Pricing under Bilateral Counterparty Risk},
  author={Peter Carr and Samim Ghamami},
  year={2015}
}
We consider risk-neutral valuation of a contingent claim under bilateral counterparty risk in a reduced-form setting similar to that of Duffie and Huang [1996] and Duffie and Singleton [1999]. The probabilistic valuation formulas derived under this framework cannot be usually used for practical pricing due to their recursive path-dependencies. Instead, finite-difference methods are used to solve the quasi-linear partial differential equations that equivalently represent the claim value function… 

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