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[02444] Pricing American XVA with stochastic default intensity

  • Session Time & Room : 2D (Aug.22, 15:30-17:10) @E709
  • Type : Contributed Talk
  • Abstract : We derive a PDE model for American derivatives' pricing including the valuation adjustment (XVA), assuming mean-reverting default risk for the counterparty, and constant default risk for the self-party. There are two nonlinear source terms, one from the American constraint and one from the XVA, handled by a double-penalty iteration. We also derive asymptotic approximations to the XVA price and to the free boundary. We present numerical experiments to study the accuracy and effectiveness of the 2D PDE and asymptotic approximations.
  • Classification : 65Mxx, 65Nxx, 91Gxx
  • Format : Talk at Waseda University
  • Author(s) :
    • Christina Christara (University of Toronto)
    • Yuwei Chen (University of Toronto)