Christian Kamtchueng

(ESSEC Business School, Paris, France – CTK Corporation, London, UK)

 

 

Abstract: After Lehman defaulted (credit crisis which started in 2007), practitioners considered the default risk as a major risk. The Industry began to charge for any default risk associated to derivatives. In this article, we establish the default risky price of a particular space of derivatives based on vanilla CVA and then highlight the arbitrage opportunities resulting of our hedging representation. It is the first time that the CVA premium is not considered as a binary relation.

 

 

Key words: CVA; netting arbitrage

 

JEL codes: C00, C15, C52, C63