Valuation and Sensitivities
Conceptually there are two steps in computing credit exposure: simulation followed by pricing. First, one needs to simulate scenarios from the distribution of the underlying processes that drive the price of the product concerned. Secondly, the price of this product needs to be evaluated at each time in the simulation schedule for each of the simulated scenarios.
KeywordsPrice Sensitivity Swap Rate Price Distribution Counterparty Risk Option Holder
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