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Efficient Option Pricing under Levy Processes, with CVA and FVA

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journal contribution
posted on 10.01.2017, 10:09 by C. K. Shek, J. Law, Sergei Levendorskiĭ
We generalize the Piterbarg [1] model to include (1) bilateral default risk as in Burgard and Kjaer [2], and (2) jumps in the dynamics of the underlying asset using general classes of Lévy processes of exponential type. We develop an efficient explicit-implicit scheme for European options and barrier options taking CVA-FVA into account. We highlight the importance of this work in the context of trading, pricing and management a derivative portfolio given the trajectory of regulations.

History

Citation

Frontiers in Applied Mathematics and Statistics, 1:6 2015

Author affiliation

/Organisation/COLLEGE OF SCIENCE AND ENGINEERING/Department of Mathematics

Version

VoR (Version of Record)

Published in

Frontiers in Applied Mathematics and Statistics

Publisher

Frontiers Media S.A.

eissn

2297-4687

Acceptance date

24/06/2015

Copyright date

2015

Available date

10/01/2017

Publisher version

http://journal.frontiersin.org/article/10.3389/fams.2015.00006/full

Language

en

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