Serving the Quantitative Finance Community
right/wrong way risk (CVA)
does anyone know if people are actively pricing right/wrong way risk for fair value markings? particularly specific wrong/right way risk. If so how are they modelling it?
Re: right/wrong way risk (CVA)
wrong way risk -often, yes, right way I suppose no, but it can be supportive to do a trade if it is arguable. Taking right way release is a bit aggressive, because monetization is difficult. The ways to calculate are non-zero correlation between factors and addons.