Research

Quantitative Consulting has many interesting research publications. Some of them were completed for the company purposes and others were outcomes of the academic research of our employees. Some of the content is accessible only after registration of your email address, rest of the content is downloadable from this site.

We hope you will find what you are looking for!

Publications

filter by

order by

alphabet:
date:
A Copula Approach to CVA Modeling, Jakub Černý, Jiří Witzany, 2015

A Copula Approach to CVA Modeling, Jakub Černý, Jiří Witzany, 2015

Copulas, counterparty credit risk, Credit Valuation Adjustment, Interest Rate Swaps, wrong-way risk

We consider counterparty credit risk in the interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates, so-called wrong-way risk. The IRS credit valuation adjustment (CVA) semi-analytical formula based on Gaussian copula assumption, presented in Černý and Witzany [2014], is further replaced by Fréchet copula (for extreme dependence) mainly based on the work of Cherubini [2013], called modified approach. The result of all three CVA calculation approaches are compared in a numerical study where we find that our semi-analytical formulas (the Gaussian copula and modified approach) provide more accurate information on IRS CVA price.

01.08.2017