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To produce autocorrelated correlated random variables, you would want to first generate the correlated random variables and then add the relevant autocorrelation terms. You ask about adding the autocorrelation without harming the correlation terms. You need to think carefully about the steps taken to estimate the terms used in the simulation. You need to ...


This only produces an approximation. As per Gregory (page 256) However, adding a spread to a contract such as a swap, the problem is non-linear since the spread itself will have an impact on the CVA. The correct value should be calculated recursively (since the spread is risky too) until the risky MTM of the contract is zero. He points to a ...

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