Bibliographic record
Abstract
We generalize the arbitrage-free valuation framework for counterparty credit risk (CCR) adjustments when credit triggers are allowed in the contract. The settlement of the deal for the investor could be either obliged or optional to execute when the counterparty hits the credit trigger before any default events from the two parties. General formulas for credit value adjustment (CVA) are given for all four cases: obliged unilateral, obliged bilateral, optional unilateral and optional bilateral. The unilateral CVA with an optional credit trigger is found to be the same as the unilateral CVA with an analogous obliged credit trigger. We show that adding credit triggers will decrease the unilateral CVA for both obliged and optional cases, which are in line with the motivation of investors to reduce CCR. However, adding credit triggers may not necessarily reduce bilateral CVA. Counter-intuitively, we show that the bilateral CVA may actually increase by adding credit triggers. Moreover, the increased amount of bilateral CVA due to credit triggers for one party is exactly the same amount of bilateral CVA reduced for the other party. The CVA calculation is subjected to large uncertainty of model risks, mostly due to the lack of data for calibrating jump-to-default probabilities. Some explicit models for obliged unilateral CVA are discussed with special caveats on the model assumptions. Numerical examples are also given to illustrate the model risk of CVA calculation due to the uncertainty of jump sizes, even though pure jump models are assumed.
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.000 | 0.000 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.000 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".