2022/04/25 by Elisa Alòs, Fabio Antonelli, Alòs, Elisa +5
Economics, Econometrics and Finance · #Computational Finance (q-fin.CP) #Credit Risk and Financial Regulations #FOS: Economics and business #Financial Markets and Investment Strategies #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.2204.11554
openalex publication_date 2022/04/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this work we present a general representation formula for the price of a vulnerable European option, and the related CVA in stochastic (either rough or not) volatility models for the underlying's price, when admitting correlation with the default event. We specialize it for some volatility models and we provide price approximations, based on the representation formula. We study numerically their accuracy, comparing the results with Monte Carlo simulations, and we run a theoretical study of the error. We also introduce a seminal study of roughness influence on the claim's price.