arXiv Open Access 2025

When defaults cannot be hedged: an actuarial approach to xVA calculations via local risk-minimization

Francesca Biagini Alessandro Gnoatto Katharina Oberpriller

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Abstrak

We consider the pricing and hedging of counterparty credit risk and funding when there is no possibility to hedge the jump to default of either the bank or the counterparty. This represents the situation which is most often encountered in practice, due to the absence of quoted corporate bonds or CDS contracts written on the counterparty and the difficulty for the bank to buy/sell protection on her own default. We apply local risk-minimization to find the optimal strategy and compute it via a BSDE.

Topik & Kata Kunci

q-fin.MF math.PR q-fin.PR

Penulis (3)

Francesca Biagini

Alessandro Gnoatto

Katharina Oberpriller

Format Sitasi

APA MLA BibTeX

Biagini, F., Gnoatto, A., Oberpriller, K. (2025). When defaults cannot be hedged: an actuarial approach to xVA calculations via local risk-minimization. https://arxiv.org/abs/2502.12774

Akses Cepat

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Informasi Jurnal

Tahun Terbit: 2025
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓