Project Description

Prior to the global financial crisis, pricing of vanilla OTC derivatives was well understood and most attention was on so‐called exotics. Credit and liquidity risk were mostly ignored as their effects were viewed as negligible.

The old style framework for pricing financial instruments is now undergoing a revolution in order to address the shortcomings highlighted by the crisis and to incorporate, properly and completely, credit risk, collateral and funding considerations into a valuation framework.

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