Does time seem to pass, even though it doesn’t, really? Many philosophers think the answer is ‘Yes’—at least when ‘time’s passing’ is understood in a particular way. They take time’s passing to be a process by which each time in turn acquires a special status, such as the status of being the only time that exists, or being the only time that is present. This chapter suggests that, on the contrary, all we perceive is temporal succession, one thing after another, (...) a notion to which modern physics is not inhospitable. The contents of perception are best described in terms of ‘before’ and ‘after’, rather than ‘past’, ‘present, and ‘future’. (shrink)

Metaphysics is the part of philosophy that asks questions about the nature of reality – about what there is, and what it is like. The metaphysics of time is the part of the philosophy of time that asks questions about the nature of temporal reality. One central such question is that of whether time passes or flows, or whether it has a dynamic aspect.

Present-bias is the preference, all else being equal, for positive events to be located in the present rather than the non-present, and for negative events to be located in the non-present rather than the present. Very little attention has been given to present-bias in the contemporary literature on time biases. This may be because it is often assumed that present-bias is not a distinctive psychological kind; that what explains people’s being present-biased is just what explains them displaying various other time-biases. (...) According to this view, there is no need to investigate present-bias independently of investigating these other biases, since present-bias is really just a manifestation of these other biases. We call this the manifestation thesis. We take up the question of whether the manifestation thesis is true, and argue that it is not. Thus, by failing to investigate present-bias in its own right we are failing fully to understand the spectrum of ways in which people display time biases. In turn, we suggest, this may have implications for the ways we evaluate whether present-bias is rationally permissible. (shrink)

Elsewhere I have suggested that the B-theory includes a notion of passage, by virtue of including succession. Here, I provide further support for that claim by showing that uncontroversial elements of the B-theory straightforwardly ground a veridical sense of passage. First, I argue that the B-theory predicts that subjects of experience have a sense of passivity with respect to time that they do not have with respect to space, which they are right to have, even according to the B-theory. I (...) then ask what else might be involved in our experience of time as passing that is not yet vindicated by the B-theoretic conception. I examine a recent B-theoretic explanation of our ‘illusory’ sense of passage, by Robin Le Poidevin, and argue that it explains away too much: our perception of succession poses no more of a problem on the B-theory than it does on other theories of time. Finally, I respond to an objection by Oreste Fiocco that a causal account of our sense of passage cannot succeed, because it leaves out the ‘phenomenological novelty’ of each moment. (shrink)

This chapter explores some of the relations between Quine’s and Carnap’s metaontological stances on the one hand, and contemporary work in the metaphysics of time, on the other. Contemporary metaphysics of time, like analytic metaphysics in general, grew out of the revival of the discipline that Quine’s critique of the logical empiricists (such as Carnap) made possible. At the same time, the metaphysics of time has, in some respects, strayed far from its Quinean roots. This chapter examines some likely Quinean (...) and Carnapian reactions to elements of the contemporary scene. (shrink)

I offer an interpretation and a partial defense of Kit Fine's ‘Argument from Passage’, which is situated within his reconstruction of McTaggart's paradox. Fine argues that existing A-theoretic approaches to passage are no more dynamic, i.e. capture passage no better, than the B-theory. I argue that this comparative claim is correct. Our intuitive picture of passage, which inclines us towards A-theories, suggests more than coherent A-theories can deliver. In Finean terms, the picture requires not only Realism about tensed facts, but (...) also Neutrality, i.e. the tensed facts not being ‘oriented towards’ one privileged time. However unlike Fine, and unlike others who advance McTaggartian arguments, I take McTaggart's paradox to indicate neither the need for a more dynamic theory of passage nor that time does not pass. A more dynamic theory is not to be had: Fine's ‘non-standard realism’ amounts to no more than a conceptual gesture. But instead of concluding that time does not pass, we should conclude that theories of passage cannot deliver the dynamicity of our intuitive picture. For this reason, a B-theoretic account of passage that simply identifies passage with the succession of times is a serious contender. (shrink)

Usually, the B-theory of time is taken to involve the claim that time does not, in reality, pass; after all, on the B-theory, nothing really becomes present and then more and more past, times do not come into existence successively, and which facts obtain does not change. For this reason, many B-theorists have recently tried to explain away one or more aspect(s) of experience that they and their opponents take to constitute an experience of time as passing. In this paper, (...) I examine three prominent proposals of this kind and argue that, though intriguing, the proposals undermine, to some extent, the assumption that there is an element of experience that B-theorists need to take to be illusory. (shrink)

This chapter discusses some aspects of the relation between temporal experience and the A versus B debate. To begin with, I provide an overview of the A versus B debate and, following Baron et al. (2015), distinguish between two B-theoretic responses to the A- theoretic argument from experience, veridicalism and illusionism. I then argue for veridicalism over illusionism, by examining our (putative) experiences as of presentness and as of time passing. I close with some remarks on the relation between veridicalism (...) and a deflationary view of the A versus B debate. I suggest that the deflationary view can provide further support for veridicalism. (shrink)

Temporal ontology is the part of ontology involving the rival positions of presentism, eternalism, and the growing block theory. While this much is clear, it’s surprisingly difficult to elucidate the substance of the disagreement between presentists and eternalists. Certain events happened that are not happening now; what is it to disagree about whether these events exist? In spite of widespread suspicion concerning the status and methods of analytic metaphysics, skeptics’ doubts about this debate have not generally been heeded, neither by (...) metaphysicians, nor by philosophers of physics. This paper revisits the question in the light of prominent elucidation attempts from both camps. The upshot is that skeptics were right to be puzzled. The paper then explores a possible re-interpretation of positions in temporal ontology that links it to normative views about how we should live as temporal beings. (shrink)

In his recent book ‘Experiencing time’, Simon Prosser discusses a wide variety of topics relating to temporal experience, in a way that is accessible both to those steeped in the philosophy of mind, and to those more familiar with the philosophy of time. He forcefully argues for the conclusion that the B-theorist of time can account for the temporal appearances. In this article, I offer a chapter by chapter response.

In this paper, I try to make sense of the growing block view using Kit Fine’s three-fold classification of A-theoretic views of time. I begin by motivating the endeavor of making sense of the growing block view by examining John Earman’s project in ‘Reassessing the prospects for a growing block model of the universe’. Next, I review Fine’s reconstruction of McTaggart’s argument and its accompanying three-fold classification of A-theoretic views. I then consider three interpretations of Earman’s growing block model: the (...) hybrid growing block, the purely tensed growing block, and Michael Tooley’s growing block. I argue for three claims. First, Finean ‘standard’ versions of these views are less congenial to the growing blocker than ‘non-standard’ ones. Second, the hybrid view is problematic on either version. And third, ‘non-standard’ versions are not fully intelligible. I provide further support for the first and third of these claims and explain why I take them to support a minimal account of passage as succession, which undercuts some of the motivation for Earman’s project. Lastly, I answer three objections. (shrink)

Some naturalists feel an affinity with some religions, or with a particular religion. They may have previously belonged to it, and/or been raised in it, and/or be close to people who belong to it, and/or simply feel attracted to its practices, texts and traditions. This raises the question of whether and to what extent a naturalist can lead the life of a religious believer. The sparse literature on this topic focuses on religious fictionalism. I also frame the debate in these (...) terms. I ask what religious fictionalism might amount to, reject some possible versions of it and endorse a different one. I then examine the existing proposals, by Robin Le Poidevin, Peter Lipton, Andrew Eshleman and Howard Wettstein, and show that even on my version of religious fictionalism, much of what has been described by these authors is still possible. (shrink)

This paper investigates the connection between temporal attitudes (attitudes characterised by a concern (or lack thereof) about future and past events), beliefs about temporal ontology (beliefs about the existence of future and past events) and temporal preferences (preferences regarding where in time events are located). Our aim is to probe the connection between these preferences, attitudes, and beliefs, in order to better evaluate the normative status of these preferences. We investigate the hypothesis that there is a three-way association between (a) (...) being present-biased (that is, preferring that positive events are located in the present, and negative events are located in the non-present), (b) believing that past and future events do not exist and (c) tending to have present-focused rather than non-present-focused temporal attitudes. We find no such association. This suggests that insofar as temporal preferences and temporal attitudes are connected to the ways we represent time, they are not connected to the ways we represent temporal ontology; rather, they are more likely connected to the ways we represent relative movement in, or of, time. This has important consequences for, first, explaining why we exhibit these preferences and, second, for their normative evaluation. (shrink)

This article relates the philosophical discussion on naturalistic religious practice to Tim Crane’s The Meaning of Belief: Religion from an Atheist’s Point of View, in which he claims that atheists can derive no genuine solace from religion. I argue that Crane’s claim is a little too strong. There is a sense in which atheists can derive solace from religion and that fact is worth acknowledging.

What, if anything, makes death bad for the deceased themselves? Deprivationists hold that death is bad for the deceased iff it deprives them of intrinsic goods they would have enjoyed had they lived longer. This view faces the problem that birth too seems to deprive one of goods one would have enjoyed had one been born earlier, so that it too should be bad for one. There are two main approaches to the problem. In this paper, I explore the second (...) approach, by Anthony Brueckner and John Martin Fischer, and suggest that it can be developed so as to meet deprivationists’ needs. On the resulting view, metaphysical differences between the future and the past give rise to a corresponding axiological difference in the intrinsic value of future and past experiences. As experiences move into the past, they lose their intrinsic value for the person. (shrink)

In this paper I revisit a dispute between Mikel Burley and Robin Le Poidevin about whether or not the B-theory of time can give its adherents any reason to be less afraid of death. In ‘Should a B-theoretic atheist fear death?’, Burley argues that even on Le Poidevin’s understanding of the B-theory, atheists shouldn’t be comforted. His reason is that the prevalent B-theoretic account of our attitudes towards the past and future precludes treating our fear of death as unwarranted. I (...) examine his argument and provide a tentative defense of Le Poidevin. I claim that while Burley rightly spots a tension with a non-revisionary approach to our ordinary emotional life, he doesn’t isolate the source of that tension. The real question is how to understand Le Poidevin’s idea that on the B-theory, we and our lives are ‘eternally real’. I then suggest that there is a view of time that does justice to Le Poidevin’s remarks, albeit a strange one. The view takes temporal relations to be quasi-spatial and temporal entities to exist in a totum simul. (shrink)

This is an invited commentary on "Physical Time within Human Time" (Gruber, Block, & Montemayor, 2022) and "Bridging the Neuroscience and Physics of Time" (Buonomano & Rovelli, 2021). I’m very sympathetic to aspects of each proposal. In this article, I offer some comments, starting with (Buonomano & Rovelli, 2021).

This article is a response to Clifford Williams’s claim that the debate between A- and B theories of time is misconceived because these theories do not differ. I provide some missing support for Williams’s claim that the B-theory includes transition, by arguing that representative B-theoretic explanations for why we experience time as passing (even though it does not) are inherently unstable. I then argue that, contra Williams, it does not follow that there is nothing at stake in the A- versus (...) B debate. (shrink)

ABSTRACT This article is a response to 'Fear of death and the symmetry argument', in this issue. In that article, the author discusses the above Lucretian symmetry argument, and proposes a view that justifies the existing asymmetry in our attitudes towards birth and death. I begin by distinguishing this symmetry argument from a different one, also loosely inspired by Lucretius, which also plays a role in the article. I then describe what I take to be the author's solution to the (...) original symmetry argument and explain why I am unpersuaded by it. (shrink)

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

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)

ㅤThis is a response to Hud Hudson's book 'The Fall and Hypertime' (OUP).

This article is an evaluation of Le Poidevin’s use of Carnap ’s stance on ontology within the philosophy of religion. Le Poidevin claims that 1) theists need to take God to be a putative entity within space-time in order for their claim that God exists to be meaningful, and that 2) instrumentalism about theology is viable. I argue that although Le Poidevin’s response to Carnap ’s argument is no less problematic than that argument itself, his position is in fact thoroughly (...) un-Carnapian. The upshot is that his discussion provides some support to atheism, but none to either of his two official conclusions. (shrink)

I respond to Jeffrey Bishop’s article ‘Arts of Dying and the Statecraft of Killing’, in this issue, and in particular to his remarks in support of the claim that assisted death should not be legalised.

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)

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)

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.

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)

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.

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)

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)

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)

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 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)

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)

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)

Background: Liver cancer is one of the malignant tumors worldwide, while the prevention and control situation is grim at present, and the diffusion of its early screening technology still faces some challenges. This study aims to investigate the influencing mechanism of perceived ease of use, organizational support mechanism, and industry competitive pressure on hepatic early screening technologies use by physicians, so as to promote the wider use of corresponding technologies. -/- Methods: Under the theoretical guidance of technology-organization-environment framework and mindsponge (...) theory, this study took hepatic contrast-enhanced ultrasound as an example, and conducted a cross-sectional questionnaire by randomly selecting physicians from Fujian and Jiangxi provinces in China with a high and low incidence of liver cancer, respectively. Structural equation modeling was used to determine the correlation among perceived ease of use, organizational support mechanism, and industry competitive pressure, as well as their impact on the physicians’ behavior toward contrast-enhanced ultrasound use. -/- Results: The hypothesis model fits well with the data (χ2/df = 1.863, GFI = 0.937, AGFI = 0.908, RMSEA = 0.054, NFI = 0.959, IFI = 0.980, CFI = 0.980). Under technology-organization-environment framework, the perceived ease of use (β = 0.171, p < 0.05), organizational support mechanism (β = 0.423, p < 0.01), industry competitive pressure (β = 0.159, p < 0.05) significantly influenced physicians’ use of hepatic contrast-enhanced ultrasound. Besides, perceived ease of use and organizational support mechanism (β = 0.216, p < 0.01), perceived ease of use and industry competitive pressure (β = 0.671, p < 0.01), organizational support mechanism and industry competitive pressure (β = 0.330, p < 0.01) were all associated significantly. -/- Conclusion: From the lens of information processing (mindsponge theory) and technology-organization-environment framework, this study clarified the social and psychological influencing mechanism of perceived ease of use, organizational support mechanism, and industry competitive pressure on physicians’ use of hepatic contrast-enhanced ultrasound. The results will directly propose recommendations for expanding hepatic contrast-enhanced ultrasound utilization and indirectly promoting other appropriate and effective health technologies diffusion within the integrated health system. (shrink)

This is a joint review of Jenann Ismael's 'How physics makes us free' (OUP).

This is a review of 'Debates in the Metaphysics of Time' (Bloomsbury), ed. by Nathan Oaklander.

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 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)

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 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 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)

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)