In this chapter we take stock of some of the complexities of the sprawling field of AI ethics. We consider questions like "what is the proper scope of AI ethics?" And "who counts as an AI ethicist?" At the same time, we flag several potential uses and abuses of AI ethics. These include challenges for the AI ethicist, including what qualifications they should have; the proper place and extent of futuring and speculation in the field; and the dilemmas concerning how (...) we use our public and academic resources. (shrink)

In this chapter we identify three potentially morally problematic behaviours that are common among users of dating and hook-up apps (DHAs) and provide arguments as to why they may or may not be considered (a) in a category of their own, distinct from similar behaviours outside of DHAs; (b) caused or facilitated by affordances and business logic of DHAs; (c) as indeed morally wrong. We also consider ways in which morally problematic behaviours can be anticipated, mitigated, or even prevented by (...) analysis of the ethical and moral dimensions of technologies and their afforded uses. Finally, we offer some possible directions for future work on these topics in particular and on the ethical consequences of DHAs in general. (shrink)

In this article, we engage with a theory of management advanced by MacIntyrean scholars of business ethics and organization studies to develop an account of “chronic moral injury” in the workplace. In contrast to what we call “acute moral injury,” which focuses on grave, traumatic events, chronic moral injury results from poor institutional form—when an individual desiring excellence must function within a vicious institution that impedes the acquisition of virtues and marginalizes practices. In other words, chronic moral injury occurs when (...) practitioners who pursue excellence in their practice work within corrupt or malformed organizations. To demonstrate this point, we recount the events associated with the rise and fall of the biotech company, Theranos. This case study advances an empirical contribution to MacIntyrean studies by demonstrating how chronic moral injury can happen under such conditions and what the negative consequences may entail for workers. (shrink)

How could ectogestative technology disrupt gender roles, parenting practices, and concepts such as ‘birth’, ‘body’, or ‘parent’? In this chapter, we situate this emerging technology in the context of the history of reproductive technologies and analyse the potential social and conceptual disruptions to which it could contribute. An ectogestative device, better known as ‘artificial womb’, enables the extra-uterine gestation of a human being, or mammal more generally. It is currently developed with the main goal of improving the survival chances of (...) extremely premature neonates. We argue that the intended use of the technology in neonatal intensive care units, as an alternative to current incubators (’partial-ectogestation’), challenges concepts such as ‘birth’, ‘fetus’, and ‘neonate’, and has several ethico-legal implications. We moreover address a more futuristic scenario where the entire embryological and fetal development could happen within an artificial womb (’full-ectogestation’). Such a scenario reveals the disruption of gender roles, parenting practices, and concepts such as ‘mother’, ‘father’, and ‘parent’. Both full- and partial-ectogestation would have implications for engineering and design, law-making, ethics, and philosophical anthropology. (shrink)

One of the most legendary educational books ever written is Jean-Jacques Rousseau’s “Émile ou de l’Education”. Most obviously Rousseau wrote this book guided by diverse more or less conscious purposes and one of the main problems it presents is paradoxical: Does education have to promote freedom by force? In this article I will, firstly, present several aims that might have triggered Rousseau to write “Émile”. Secondly, I will discuss Rousseau’s view of the so called “educational paradox”. Since this quandary touches (...) the topic of many other of his books, I will discuss “Émile” along with Rousseau’s other works and thus place his educational story in his “great narrative”. (shrink)

Lack of a historical sense is the hereditary defect of philosophers. … So what is needed from now on is historical philosophizing, and with it the virtue of modesty.

Kunstmatige intelligentie (AI) en systemen die met machine learning (ML) werken, kunnen veel onderdelen van het medische besluitvormingsproces ondersteunen of vervangen. Ook zouden ze artsen kunnen helpen bij het omgaan met klinische, morele dilemma’s. AI/ML-beslissingen kunnen zo in de plaats komen van professionele beslissingen. We betogen dat dit belangrijke gevolgen heeft voor de relatie tussen een patiënt en de medische professie als instelling, en dat dit onvermijdelijk zal leiden tot uitholling van het institutionele vertrouwen in de geneeskunde.

It is not clear to what the projects of creating an artificial intelligence (AI) that does ethics, is moral, or makes moral judgments amounts. In this paper we discuss some of the extant metaethical theories and debates in moral philosophy by which such projects should be informed, specifically focusing on the project of creating an AI that makes moral judgments. We argue that the scope and aims of that project depend a great deal on antecedent metaethical commitments. Metaethics, therefore, plays (...) the role of an Archimedean fulcrum in this context, very much like the Archimedean role that it is often taken to take in context of normative ethics (Dworkin 1996; Dreier 2002; Fantl 2006; Ehrenberg 2008). (shrink)

In this chapter, we consider ethical and philosophical aspects of trust in the practice of medicine. We focus on trust within the patient-physician relationship, trust and professionalism, and trust in Western (allopathic) institutions of medicine and medical research. Philosophical approaches to trust contain important insights into medicine as an ethical and social practice. In what follows we explain several philosophical approaches and discuss their strengths and weaknesses in this context. We also highlight some relevant empirical work in the section on (...) trust in the institutions of medicine. It is hoped that the approaches discussed here can be extended to nursing and other topics in the philosophy of medicine. (shrink)

Introduction: The development of advanced sewage technologies empowers the industry to produce high-quality recycled water, which greatly influences human’s life and health. Thus, this study investigates the mechanism of individuals’ adoption of recycled water from the technology adoption perspective. -/- Methods: Employing the mixed method of structural equation modeling and artificial neural network analysis, we examined a research model developed from the extended Unified Theory of Acceptance and Use of Technology (UTAUT2) framework. To examine the research model, this study employs (...) a leading web-survey company (Sojump) to collect 308 valid samples from the residents in mainland China. -/- Results: The structural equation modeling results verified the associations between the six predictors (performance expectancy, effort expectancy, social influence, facilitating conditions, environmental motivation, and price value), individuals’ cognitive and emotional attitudes, and acceptance intention. The artificial neural network analysis validates and complements the structural equation modeling results by unveiling the importance rank of the significant determinants of the acceptance decisions. -/- Discussion: The study provides theoretical implications for recycled water research and useful insights for practitioners and policymakers to reduce the environmental hazards of water scarcity. (shrink)

This article presents a comprehensive framework for valuing financial instruments subject to credit risk. In particular, we focus on the impact of default dependence on asset pricing, as correlated default risk is one of the most pervasive threats in financial markets. We analyze how swap rates are affected by bilateral counterparty credit risk, and how CDS spreads depend on the trilateral credit risk of the buyer, seller, and reference entity in a contract. Moreover, we study the effect of collateralization on (...) valuation, since the majority of OTC derivatives are collateralized. The model shows that a fully collateralized swap is risk-free, whereas a fully collateralized CDS is not equivalent to a risk-free one. (shrink)

Ratio, Volume 34, Issue 4, Page 303-311, December 2021.

All through the COVID-19-crisis Conspiracy Theories and False Information spread all around the globe. In this article, we want to suggest that the spreading and retainment of disinformation despite counter-evidence is best to be understood in the context of echo chambers as described by Chris Thi Nguyen. Moreover, we want to argue that people active in those echo chambers are at the same time perpetrators as well as victims of epistemic injustice to different amounts. Although this article cannot cover the (...) phenomenon as a whole, we hope to outline a path for further investigation. (shrink)

This paper presents a Least Square Monte Carlo approach for accurately calculating credit value adjustment (CVA). In contrast to previous studies, the model relies on the probability distribution of a default time/jump rather than the default time itself, as the default time is usually inaccessible. As such, the model can achieve a high order of accuracy with a relatively easy implementation. We find that the valuation of a defaultable derivative is normally determined via backward induction when their payoffs could be (...) positive or negative. Moreover, the model can naturally capture wrong or right way risk. (shrink)

The incremental risk charge (IRC) is a new regulatory requirement from the Basel Committee in response to the recent financial crisis. Notably few models for IRC have been developed in the literature. This paper proposes a methodology consisting of two Monte Carlo simulations. The first Monte Carlo simulation simulates default, migration, and concentration in an integrated way. Combining with full re-valuation, the loss distribution at the first liquidity horizon for a subportfolio can be generated. The second Monte Carlo simulation is (...) the random draws based on the constant level of risk assumption. It convolutes the copies of the single loss distribution to produce one year loss distribution. The aggregation of different subportfolios with different liquidity horizons is addressed. Moreover, the methodology for equity is also included, even though it is optional in IRC. (shrink)

The one-side defaultable financial derivatives valuation problems have been studied extensively, but the valuation of bilateral derivatives with asymmetric credit qualities is still lacking convincing mechanism. This paper presents an analytical model for valuing derivatives subject to default by both counterparties. The default-free interest rates are modeled by the Market Models, while the default time is modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a (...) better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread. (shrink)

This article presents a new model for valuing financial contracts subject to credit risk and collateralization. Examples include the valuation of a credit default swap (CDS) contract that is affected by the trilateral credit risk of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to (...) a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market. (shrink)

Volume 19, Issue 7, July 2019, Page 39-40.

Advocates of moral enhancement through pharmacological, genetic, or other direct interventions sometimes explicitly argue, or assume without argument, that traditional moral education and development is insufficient to bring about moral enhancement. Traditional moral education grounded in a Kohlbergian theory of moral development is indeed unsuitable for that task; however, the psychology of moral development and education has come a long way since then. Recent studies support the view that moral cognition is a higher-order process, unified at a functional level, and (...) that a specific moral faculty does not exist. It is more likely that moral cognition involves a number of different mechanisms, each connected to other cognitive and affective processes. Taking this evidence into account, we propose a novel, empirically informed approach to moral development and education, in children and adults, which is based on a cognitive-affective approach to moral dispositions. This is an interpretative approach that derives from the cognitive-affective personality system (Mischel and Shoda, 1995). This conception individuates moral dispositions by reference to the cognitive and affective processes that realise them. Conceived of in this way, moral dispositions influence an agent's behaviour when they interact with situational factors, such as mood or social context. Understanding moral dispositions in this way lays the groundwork for proposing a range of indirect methods of moral enhancement, techniques that promise similar results as direct interventions whilst posing fewer risks. (shrink)

Chinese international students who studied in the United States received “double stigmatization” from American and Chinese authorities because of the “political othering” tactic during COVID-19. The research used a phenomenological approach to examine why and how specifically the transnational identity of Chinese international students in the United States shifted during the double stigmatization. The researcher conducted a total of three rounds of interviews with 15 Chinese international students who studied in the United States and returned to China between 2018 and (...) 2020, which culminated in 45 interviews through a longitudinal study to probe the transnational identities of this population before and during the double stigmatization; the study also examined how the mindsponge mechanism worked during the identity shifts and the interplay among stigmatization, transnational identity shifts, and the mindsponge mechanism. The study concluded that before COVID-19, Chinese international students had been stigmatized in both China and the United States. (shrink)

Engineering an artificial intelligence to play an advisory role in morally charged decision making will inevitably introduce meta-ethical positions into the design. Some of these positions, by informing the design and operation of the AI, will introduce risks. This paper offers an analysis of these potential risks along the realism/anti-realism dimension in metaethics and reveals that realism poses greater risks, but, on the other hand, anti-realism undermines the motivation for engineering a moral AI in the first place.

A combinatorial analysis of intrinsicality takes intrinsic properties to be independent of accompaniment: a property is intrinsic only if it is possible for a lonely or an accompanied thing to have it or lack it (I). Cameron argues that the combinatorial analysis in Langton & Lewis (1998) faces an epistemic circularity, which makes (I) suspicious. In this paper, I examine two approaches to free the combinatorial analyses from the circularity and find them all fail. Then I provide an outline of (...) an argument for (I) by appealing to the grounding analyses of intrinsicality, which shows an advantage of the grounding analyses over the combinatorial ones. (shrink)

This paper attempts to assess the economic significance and implications of collateralization in different financial markets, which is essentially a matter of theoretical justification and empirical verification. We present a comprehensive theoretical framework that allows for collateralization adhering to bankruptcy laws. As such, the model can back out differences in asset prices due to collateralized counterparty risk. This framework is very useful for pricing outstanding defaultable financial contracts. By using a unique data set, we are able to achieve a clean (...) decomposition of prices into their credit risk factors. We find empirical evidence that counterparty risk is not overly important in credit-related spreads. Only the joint effects of collateralization and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of financial contracts. We also analyze the difference between cleared and OTC markets. (shrink)

Objectives: The growing rate of retraction of scientific publications has attracted much attention within the academic community, but there is little knowledge about the nature of such retractions in schizophrenia-related research. This study aimed to analyze the characteristics of retractions of schizophrenia-related publications.

Dating and hookup apps (DHAs) are now widely used and may be transforming our intimate relationships. The apps are beneficial in fostering intimate connections among those who are lonely, who are members of minority or marginalized groups, or who live nomadic lifestyles because of work or recreational travel. However, the wider social and relational changes that DHAs portend are merely beginning to be seriously discussed by academics (Arias et al., 2017). In this chapter, we employ concepts from the philosophy of (...) technology that inform our analysis of these changes. We also collate some of the morally significant impacts of DHAs and present some of the elements of the architecture of DHAs that facilitate them. Although there are many reasons to be concerned about DHAs, we argue that there is room for cautious optimism that DHAs may be vehicles of positive social and moral change. (shrink)

Both motivational internalism and externalism need to explain why sometimes moral judgments tend to motivate us. In this paper, I argue that Dreier’ second-order desire model cannot be a plausible externalist alternative to explain the connection between moral judgments and motivation. I explain that the relevant second-order desire is merely a constitutive requirement of rationality because that desire makes a set of desires more unified and coherent. As a rational agent with the relevant second-order desire is disposed towards coherence, she (...) will have some motivation to act in accordance with her moral judgments. Dreier’s second-order desire model thus collapses into a form of internalism and cannot be a plausible externalist option to explain the connection between moral judgments and motivation. (shrink)

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding derivatives. Using a unique dataset, we find empirical evidence that credit risk alone is not overly important in determining credit-related spreads. Only accounting for both collateral arrangement and credit risk can sufficiently explain unsecured credit costs. This (...) finding suggests that failure to properly account for collateralization may result in significant mispricing of derivatives. We also empirically gauge the impact of collateral agreements on risk measurements. Our findings indicate that there are important interactions between market and credit risk. (shrink)

This paper provides an analysis of the way in which two foundational principles of medical ethics–the trusted doctor and patient autonomy–can be undermined by the use of machine learning (ML) algorithms and addresses its legal significance. This paper can be a guide to both health care providers and other stakeholders about how to anticipate and in some cases mitigate ethical conflicts caused by the use of ML in healthcare. It can also be read as a road map as to what (...) needs to be done to achieve an acceptable level of explainability in an ML algorithm when it is used in a healthcare context. (shrink)

In this thesis, I explore motivational internalism and externalism, which concern the relationship between moral judgments and motivation. I first introduce the basic terms and different forms of internalism and externalism, including the externalist objections to internalism based on the famous counterexamples. I then argue against externalism by defending and developing Michael Smith’s fetishism argument. I not only respond to the externalist objections to the fetishism argument but also further argue against different externalist explanations of moral motivation that intend to (...) avoid the fetishism charge. Finally, I re-examine different forms of internalism in order to argue for a new form of internalism that can better preserve our internalist intuitions whilst accommodating the externalist counterexamples. My ultimate conclusion will be that the most plausible form of internalism to accept is constitutional, unconditional, relatively strong, direct internalism that is formulated in terms of dispositional desires. (shrink)

Equity-linked securities with a guaranteed return become popular in a volatile market environment. This paper presents a new model for valuing guaranteed equity-linked notes. We consider a security whose value depends on the performance of a basket of equities averaged over certain points in time, but that is floored by a guaranteed amount. We show that the security’s price is given by the sum of the guaranteed amount plus the price of an Asian style option on the basket above. The (...) model provides analytical formulas for the security’s price as well as for corresponding hedge ratios; these respective formulas appear to be accurate over a wide range of underlying security parameter values, based on numerical testing against a Monte Carlo benchmark, Finally, we apply our method to value a type of segregated fund with a maturity guarantee. (shrink)

The proposition that digital innovations can put people in charge of their health has been accompanied by prolific talk of empowerment. In this paper we consider ethical challenges and opportunities of trying to achieve justice and empowerment using digital health initiatives. The language of empowerment can misleadingly suggest that by using technology, people can control their health and take responsibility for health outcomes to a greater degree than is realistic or fair. Also, digital health empowerment often primarily reaches people who (...) already have high technological and health literacy, leaving others behind. We critically investigate whether the concept of health empowerment could be re-engineered to mean something different, namely the process of improving the health literacy and access of those who least possess it, in line with recent proposals for conceptual engineering in the service of justice. We settle on the weaker conclusion that underlying ethical values including justice should be used to interpret the existing concept of empowerment. To conclude, we take a high-level view of various strategies for achieving the ethical value associated with digital health empowerment. (shrink)

Ang papel ay paglalagom ng itinuturing na pinakamahalagang yugto ng buhay ni José Rizal—ang kanyang pagkakatapon sa Dapitan, sa lente ng konseptong “bagani” ng ating mga ninuno. Sa pagbanggit sa lang nauna nang pag-aaral ukol kay Rizal, ipapakitang kung papaanong ang yugto sa Dapitan ay ang katuparan ng kanyang mga layunin sa La Liga Filipina, na kanyang isinabuhay kasama ang bayan. Sa lente ng kasalukuyang pandemyang COVID 19, makikita natin na tila naranasan din ni Rizal sa kanyang pagkakatapon ang ilang (...) bagay na ating dinaranas ngayon, na tila siya isang frontliner na nasa lockdown, inilagay sa kuwarentena, nag-homeschooling, nagkaroon ng lockdown sickness at namahagi ng ayudang pangkabuhayan sa mga mamamayan ng isang natutulog na bayan upang ito ay sumiglang muli. Nawa ay maging inspirasyon sa bayan na anuman ang hamon at mga balakid, walang makapipigil sa isang Pilipino na magsilbi sa bayan gamit ang kanyang mga talento at manatiling liwanag ng katotohanan at kaalaman. (shrink)

The LIBOR Market Model has become one of the most popular models for pricing interest rate products. It is commonly believed that Monte-Carlo simulation is the only viable method available for the LIBOR Market Model. In this article, however, we propose a lattice approach to price interest rate products within the LIBOR Market Model by introducing a shifted forward measure and several novel fast drift approximation methods. This model should achieve the best performance without losing much accuracy. Moreover, the calibration (...) is almost automatic and it is simple and easy to implement. Adding this model to the valuation toolkit is actually quite useful; especially for risk management or in the case there is a need for a quick turnaround. (shrink)

This paper explores the connections between being Chinese in various senses and the study of Chinese philosophy.

In this essay, we will follow Tang Junyi’s lead in exploring issues related to Chinese diaspora and Chinese philosophy. While we largely endorse Tang’s call for overseas Chinese to establish themselves in their adopted lands, we will argue for a more nuanced view on the identity of Chinese people outside China: they are not marginalized individuals scattered out of “homeland” China, rather they are people legitimately established in their own respective countries. In this connection, we will also advance a view (...) of future Chinese philosophy as a world philosophy that takes roots in China as well as in the world at large. In our view, although Chinese immigrant thinkers in the past century have played a major role in promoting Chinese philosophy outside China, the importance of such a role is likely to decline along with the success of Chinese philosophy becoming a world philosophy. (shrink)

This article presents a new methodology for pricing and hedging commodity derivatives. A generic model calibration is provided. The calibration procedure consists of an offline step where the mean reversion rates, the ratio of the long and short factor volatilities and the correlation between the long and short factors are determined via historical analysis. This offline step is performed relatively infrequently. There’s also an online step of the calibration which happens every time the model is used to price an option (...) or to simulate price paths. Empirical study shows that the model is quite accurate. (shrink)

This report aims to offer insights into cutting-edge research on digital well-being. Many of these insights come from a 2-day academic-impact event, The Future of Digital Well-Being, hosted by a team of researchers working with the Royal Netherlands Academy of Arts and Sciences (KNAW) in February 2024. Today, achieving and maintaining well-being in the face of online technologies is a multifaceted challenge that we believe requires using theoretical resources of different research disciplines. This report explores diverse perspectives on how digital (...) well-being can be actively cultivated, while also emphasising the importance of considering individual differences, societal contexts, and nuanced cultural factors. We aim to offer a holistic view of the future of digital well-being, one that will inspire the next generation of designers of online tools, as well as policymakers who will regulate these tools. We start by asking what digital well-being is – how we can best define a concept that is used by diverse stakeholders and researchers from many disciplines in various ways. To do this, we explore the classic ethical theories of well-being, showing how they can give us insights into how the term digital well-being is currently deployed. We then move to look at the existing strategies that have been proposed to actively cultivate digital well-being, exploring the business models that threaten digital well-being and the relative advantages of the digital and non-digital solutions that are currently proposed. On the one hand, digital tools – such as Apple’s Screen Time and app blockers such as Opal and Forest – integrate seamlessly with the digital lifestyles of users. They also create precise metrics for digital well-being, which facilitates their solutions to reduce screen time. On the other hand, non-digital solutions, including mindfulness practices, digital detoxes, and digital well-being coaching, offer a new set of tools to reconnect individuals to their natural rhythms and help to actively promote offline activities. We then move to discuss diversity and how various groups of users have strikingly different digital well-being needs. Embracing neurodiversity in digital well-being is crucial as it strongly impacts the users’ experience of online technologies. When designing for diversity, organisations and designers alike need to prioritise customization for people with physical disabilities, mitigate harmful content for users with mental well-being conditions, address gender stereotypes and online harassment, and be designed in ways that recognize the very real risks of online technologies. This report closes by examining cultural differences. We believe that non-Western conceptions of well-being offer rich sources for enhancing digital well-being insofar as these traditions can inform and inspire the designers of future online technologies. We focus on East-Asian and South-Asian traditions, although in further work we recognise it would be useful to investigate conceptions of well-being that are influential in the Gulf region, Africa, and South America. Each of these areas have ethical frameworks that discuss well-being in depth as well as a rich cultural heritage. In conclusion, this report’s insights underscore the imperative of recognizing diversity in digital well-being, both in terms of cultural contexts and disciplinary perspectives. It emphasises the need for culturally responsive design methodologies and the integration of non-Western philosophical perspectives into current digital well-being research. Embracing this diversity, we believe, offers the best chance to create digital environments that prioritise well-being for users and the societies they live in across the world. Ultimately, we believe that it is not only about designing better online products; it’s about shaping a digital landscape that promotes well-being and flourishing for everyone. (shrink)

During the lifetime of a structured product, payment events and cancellation events mainly affect the value of the option. This article presents a model for pricing generic cancellable option. The model is used to build most common kinds of cancellation schedules and compute the cancellation probability.

This paper argues that the reduced-form jump diffusion model may not be appropriate for credit risk modeling. To correctly value hybrid defaultable financial instruments, e.g., convertible bonds, we present a new framework that relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due (...) to convertible underpricing. Empirically, however, we do not find evidence supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price. (shrink)

This paper presents a new model for valuing hybrid defaultable financial instruments, such as, convertible bonds. In contrast to previous studies, the model relies on the probability distribution of a default jump rather than the default jump itself, as the default jump is usually inaccessible. As such, the model can back out the market prices of convertible bonds. A prevailing belief in the market is that convertible arbitrage is mainly due to convertible underpricing. Empirically, however, we do not find evidence (...) supporting the underpricing hypothesis. Instead, we find that convertibles have relatively large positive gammas. As a typical convertible arbitrage strategy employs delta-neutral hedging, a large positive gamma can make the portfolio highly profitable, especially for a large movement in the underlying stock price. (shrink)

This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American style options in most cases, which require a backward induction valuation. To correct a common mistake in the literature, we emphasize that the market value of a defaultable derivative is actually a risky value rather than a risk-free value. Credit value adjustment (CVA) is also (...) elaborated. A practical framework is developed for pricing defaultable derivatives and calculating their CVAs at a portfolio level. (shrink)

This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in (...) the CDS market. (shrink)