Gianfagna, Laura Rating and Pricing: State of the art for the proposal of new methodologies. In: LCBR Finance and Economics Conference, August 13-15, 2014, Munich, Germany (2014)
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Abstract
Paraphrasing a sentence from the Nobel Prize Robert Merton, without the Risk we would have not need of Finance; Economy would be sufficient to describe and manage financial transactions across agents and Countries . The ability of transferring the risk expresses the main aim of Finance; a correct evaluation of the counterparty risk is one of the main goal of credit risk theory. Financial crisis remark this necessity: if a financial contract such as a Credit Default Swap, which, by definition, is a tool to protect against the default risk of a counterpart, is traded between banks and insurance companies that can not exactly evaluate the financial position of customers, the effects on global Equilibrium and the loss of value can be severe. The question of pricing methodologies is strictly linked to the previous topic: is rating sufficient to catch all price fluctuations? What are the advantages and disadvantages of nowadays pricing methodologies? In which directions can them be switched or improved? Mathematics can give an answer to us? How information underlying market risk can be allowed into a Mathematical model of pricing in order not to affect a correct credit risk evaluation? These are the questions this article will answer.
| Item Type: | Conference or Workshop Item (Paper) |
|---|---|
| Subjects: | H Social Sciences > HB Economic Theory |
| Research Area: | Economics and Institutional Change |
| Depositing User: | Caterina Tangheroni |
| Date Deposited: | 06 Mar 2017 14:48 |
| Last Modified: | 06 Mar 2017 14:48 |
| URI: | http://eprints.imtlucca.it/id/eprint/3658 |
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