2 papers
q-fin.PR2020
Derivatives Discounting Explained
Wujiang Lou
Derivative pricing is about cash flow discounting at the riskfree rate. This teaching has lost its meaning post the financial crisis, due to the addition of extra value adjustments…
q-fin.PR2020
The Fair Basis: Funding and capital in the reduced form framework
Wujiang Lou
A negative basis trade enters a long bond position and buys protection on the issuer of the bond through credit default swap (CDS), aiming at arbitrage profit due to the bond-CDS b…