Impact of Multiple Curve Dynamics in Credit Valuation Adjustments

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Title: Impact of Multiple Curve Dynamics in Credit Valuation Adjustments
Authors: Bormetti, G
Brigo, D
Francischello, M
Pallavicini, A
Item Type: Conference Paper
Abstract: We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011) can be helpful in defining the key market rates underlying the multiple interest rate curves that characterize current interest rate markets. We introduce the collateralized valuation measures and formulate a consistent realistic dynamics for the rates emerging from our analysis. We point out limitations of multiple curve models with deterministic basis considering valuation of particularly sensitive products such as basis swaps.
Issue Date: 31-Dec-2016
Date of Acceptance: 4-Oct-2016
ISBN: 9783319334455
ISSN: 2194-1009
Publisher: Springer
Start Page: 251
End Page: 266
Journal / Book Title: Innovations in Derivatives Markets. Fixed Income Modeling, Valuation Adjustments, Risk Management, and Regulation
Copyright Statement: This chapter is distributed under the terms of the Creative Commons Attribution 4.0 International License (, which permits use, duplication, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, a link is provided to the Creative Commons license and any changes made are indicated. The images or other third party material in this chapter are included in the work’s Creative Commons license, unless indicated otherwise in the credit line; if such material is not included in the work’s Creative Commons license and the respective action is not permitted by statutory regulation, users will need to obtain permission from the license holder to duplicate, adapt or reproduce the material.
Conference Name: Challenges in Derivatives Markets
Publication Status: Published
Start Date: 2015-03-30
Conference Place: Munich
Appears in Collections:Financial Mathematics
Applied Mathematics and Mathematical Physics
Faculty of Natural Sciences

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