We investigate counterparty credit risk and credit valuation adjustments in portfolios including derivatives with early-exercise opportunities, under a netting agreement. We show that credit risk and netting agreements have a significant impact on the way portfolios are managed (that is, on options’ exercise strategies) and, therefore, on the value of the portfolio and on the price of counterparty risk. We derive the value of a netted portfolio as the solution of a zero-sum, finite horizon, discrete-time stochastic game. We show that this dynamic-game interpretation can be used to determine the value of the reglementary capital charges required of financial institutions to cover for counterparty credit risk and we propose a numerical valuation method. Numerical investigations show that currently used numerical approaches can grossly misestimate the value of credit valuation adjustments.

中文翻译：

---

净额结算协议下交易对手信用风险评估


我们根据净额结算协议调查投资组合中的交易对手信用风险和信用估值调整，包括具有早期行权机会的衍生品。我们表明，信用风险和净额结算协议对投资组合的管理方式（即期权的行权策略）有重大影响，因此对投资组合的价值和交易对手风险的价格也有重大影响。我们将净额投资组合的价值推导为零和、有限视野、离散时间随机博弈的解。我们证明，这种动态博弈解释可用于确定金融机构覆盖交易对手信用风险所需的监管资本要求的价值，并提出了一种数值估值方法。数值调查表明，当前使用的数值方法可能严重错误估计信用估值调整的价值。