Lecture_7_CVA_201820180402201111
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CVA Calculation
Monte Carlo Valuation
Approximation 1: Correlation Default/Exposure
Finally, we introduce correlation between credit (9) and interest rates (10), as follows:
corr(dλ(t),dr φ (t)) = corr(dλ(t),dr(t)) = ρ λr dt
Paola Mosconi 20541 – Lecture 10-11 50 / 86
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