With the rapid development of information technology, the electricity consumption of Internet Data Centers (IDCs) increases drastically, resulting in considerable carbon emissions that need to be reduced urgently. In addition to the introduction of Renewable Energy Sources (RES), the joint use of the spatial migration capacity of IDC workload and the temporal flexibility of the demand of Electric Vehicle Charging Stations (EVCSs) provides an important means to change the carbon footprint of the IDC. In this paper, a sustainability improvement strategy (...) for the IDC carbon emission reduction was developed by coordinating the spatial-temporal dispatch flexibilities of the IDC workload and the EVCS demand. Based on the Minkowski sum algorithm, a generalized flexible load model of the EVCSs, considering traffic flow and Road Impedance (RI) was formulated. The case studies show that the proposed method can effectively increase the renewable energy consumption, reduce the overall carbon emissions of multi-IDCs, reduce the energy cost of the DCO, and utilize the EV dispatching potential. Discussions are also provided on the relationship between workload processing time delay and the renewable energy consumption rate. (shrink)

In a recent paper, Francis Y. Lin proposes a “memory-challenge” to two main interpretations of Wittgenstein’s private language argument: the “no-criterion-of-correctness” interpretation and the “no-stage-setting” interpretation. According to Lin, both camps of interpretation fail to explain why a private language is impossible within a short time period. To answer the “memory-challenge”, Lin motivates a grammatical interpretation of the private language argument. In this paper, I provide a critical discussion of Lin’s objection to these interpretations and argue that Lin’s objection fails. (...) In the case of the “no-stage-setting” interpretation, Lin suggests that the private language user can establish a stage within a short time period. However, I show that this stage is insufficient for a private language to be used correctly. In the case of the “no-criterion-of-correctness” interpretation, Lin believes that since memory is reliable within a short period, no criterion is needed for the correct use of a private language. However, I argue that his objection attacks a strawman, since the interpretation concerns the structure of justification, rather than the weakness of memory itself. I conclude with a critical discussion on memory and primitive expressions, the latter of which are crucial to Wittgenstein’s approach to public language. This discussion will help to draw a sharp line between private language and public language, and cast some doubt on Lin’s grammatical interpretation. (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)

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

We often feel survivor guilt when the very circumstances that harm others leave us unscathed. Although survivor guilt is both commonplace and intelligible, it raises a puzzle for the standard philosophical account of guilt, according to which people feel guilt only when they take themselves to be morally blameworthy. The standard account implies that survivor guilt is uniformly unfitting, as people are not blameworthy simply for having fared better than others. In this paper, we offer a rival account of guilt, (...) the relational account of guilt, which makes sense of survivor guilt and other forms of guilt without self-blame while preserving the intelligibility of guilt about culpable wrongdoing. According to this account, guilt involves the feeling of being unable to justify ourselves to others, and we lack self-justification when we (however blamelessly) stand on the positive side of an undesirable asymmetry with them. When someone survives something that those around her do not, the disparity in outcome constitutes an asymmetry that is often undesirable, because it arises from luck or violates a requirement of solidarity. Thus, survivor guilt is often fitting. (shrink)

This study systematically examined people’s protective behaviors against COVID-19 in China, and particular attention was given to people’s perceived threat and information-processing strategies. This study constructed a conceptual model and used structural equation modeling to explore this issue, and a questionnaire survey was conducted to collect data involving 4,605 participants during the early stage of the COVID-19 pandemic in China. The results showed that people’s initial information acquisition played an essential role in their behavioral responses; acquiring more initial information about (...) COVID-19 would make them perceive a higher threat and present a higher demand for information, then making them more likely to seek and process information, and subsequently motivating their protective behaviors. (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)

Rationale and objectives: Medical humanities are becoming increasingly recognized as positively impacting medical education and medical practice. However, the extent of medical humanities teaching in medical schools is largely unknown. We reviewed medical school curricula in Canada, the UK and the US. We also explored the relationship between medical school ranking and the inclusion of medical humanities in the curricula. -/- Methods: We searched the curriculum websites of all accredited medical schools in Canada, the UK and the US to check (...) which medical humanities topics were taught, and whether they were mandatory or optional. We then noted rankings both by Times Higher Education and U.S. News and World Report and calculated the average rank. We formally explored whether there was an association between average medical school ranking and medical humanities offerings using Spearman's correlation and inverse variance weighting meta-analysis. -/- Results: We identified 18 accredited medical school programmes in Canada, 41 in the UK, and 154 in the US. Of these, nine (56%) in Canada, 34 (73%) in the UK and 124 (80%) in the US offered at least one medical humanity that was not ethics. The most common medical humanities were medical humanities (unspecified), history, and literature (Canada); sociology and social medicine, medical humanities (unspecified), and art (UK); and medical humanities (unspecified), literature and history (US). Higher ranked medical schools appeared less likely to offer medical humanities. -/- Conclusions: The extent and content of medical humanities offerings at accredited medical schools in Canada, the UK and the US varies, and there appears to be an inverse relationship between medical school quality and medical humanities offerings. Our analysis was limited by the data provided on the Universities' websites. Given the potential for medical humanities to improve medical education and medical practice, opportunities to reduce this variation should be exploited. (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)

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.

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)

Policies that require male-female sex comparisons in all areas of biomedical research conflict with the goal of improving health outcomes through context-sensitive individualization of medical care. Sex, like race, requires a rigorous, contextual approach in precision medicine. A “sex contextualist” approach to gender-inclusive medicine better aligns with this aim.

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)

The safety condition is supposed to be a necessary condition on knowledge which helps to eliminate epistemic luck. It has been argued that the condition should be globalized to a set of propositions rather than the target proposition believed to account for why not all beliefs in necessary truths are safe. A remaining issue is which propositions are relevant when evaluating whether the target belief is safe or not. In the literature, solutions have been proposed to determine the relevance of (...) propositions. This paper examines a case of luckily true belief—thus a case of ignorance—and a case of knowledge. It argues that no solution in the literature offers a correct verdict in either case. Therefore, the strategy to globalize safety remains unsatisfactory. (shrink)

It has been argued that an advantage of the safety account over the sensitivity account is that the safety account preserves epistemic closure, while the sensitivity account implies epistemic closure failure. However, the argument fails to take the method-relativity of the modal conditions on knowledge, viz., sensitivity and safety, into account. In this paper, I argue that the sensitivity account and the safety account are on a par with respect to epistemic closure once the method-relativity of the modal conditions is (...) taken into account. Therefore, epistemic closure is no longer an arbiter in the debate. (shrink)

Many philosophers assume that, when making moral decisions under uncertainty, we should choose the option that has the greatest expected moral value, regardless of how risky it is. But their arguments for maximizing expected moral value do not support it over rival, risk-averse approaches. In this paper, I present a novel argument for maximizing expected value: when we think about larger series of decisions that each decision is a part of, all but the most risk-averse agents would prefer that we (...) consistently choose the option with the highest expected value. To the extent that what we choose on a given occasion should be guided by the entire series of choices we prefer, then on each occasion, we should choose the option with the highest expected moral value. (shrink)

This paper examines the role existence plays in measurement validity. I argue that existing popular theories of measurement and of validity follow a correspondence framework, which starts by assuming that an entity exists in the real world with certain properties that allow it to be measurable. Drawing on literature from the sociology of measurement, I show that the correspondence framework faces several theoretical and practical challenges. I suggested the validity-first framework of measurement, which starts with a practice-based validation process as (...) the basis for a measurement theory, and only posits objective existence when it is scientifically useful to do so. (shrink)

According to the received account of guilt in the philosophical literature, one cannot feel guilt unless one takes oneself to have done something morally wrong. But ordinary people feel guilt in many cases in which they do not take themselves to have done anything morally wrong. In this paper, I focus on one kind of guilt without perceived wrongdoing, guilt about being merely causally responsible for a bad state-of-affairs. I go on to present a novel account of guilt that explains (...) guilt about mere causal responsibility, according to which guilt represents part of the self as bound up with what is bad. (shrink)

According to the sensitivity account of knowledge, S knows that p only if S’s belief in p is sensitive in the sense that S would not believe that p if p were false. The sensitivity condition is usually relativized to belief-formation methods to avoid putative counterexamples. A remaining issue for the account is where methods should be mentioned in the sensitivity subjunctives. In this paper, I argue that if methods are mentioned in the antecedent, then the account is too strong (...) to accommodate inductive knowledge; if methods are mentioned in the consequent, then the account is too weak to eliminate some luckily true beliefs from the realm of knowledge. Therefore, the strategy to relativize the sensitivity condition is undermined by inductive knowledge and some luckily true beliefs. (shrink)

The social sciences face a problem of sample non-representation, where the majority of samples consist of undergraduate students from Euro-American institutions. The problem has been identified for decades with little trend of improvement. In this paper, I trace the history of sampling theory. The dominant framework, called the design-based approach, takes random sampling as the gold standard. The idea is that a sampling procedure that is maximally uninformative prevents samplers from introducing arbitrary bias, thus preserving sample representation. I show how (...) this framework, while good in theory, faces many challenges in application. Instead, I advocate for an alternative framework, called the model-based approach to sampling, where representative samples are those balanced in composition, however they were drawn. I argue that the model-based framework is more appropriate in the social sciences because it allows for systematic assessment of imperfect samples and methodical improvement in resource-limited scientific contexts. I end with practical proposals of improving sample quality in the social sciences. (shrink)

According to the safety account of knowledge, one knows that p only if one’s belief could not easily have been false. An important issue for the account is whether we should only examine the target belief when evaluating whether a belief is safe or not. In this paper, it is argued that, if we should only examine the target belief, then the account fails to account for ignorance of necessary truths. But, if we should also examine beliefs in other relevant (...) propositions, then the account fails to account for knowledge from falsehood. Therefore, the safety account of knowledge is undermined by knowledge from falsehood and ignorance of necessary truths. (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)

Solidarity is a widespread but under-explored phenomenon. In this paper, I give a philosophical account of solidarity, answering three salient questions: What motivates acts of solidarity? What unifies different acts into tokens of a single type of act, one of solidarity? And what values do acts of solidarity exhibit? The answer to all three, I argue, involves a certain way of relating to others: identifying with them on the basis of shared features, and identifying with the larger group that one (...) and the others both belong to. (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)

According to many philosophers, "the meaning of life" refers to our cosmic purpose, the activity that we were created by God or a purposive universe to perform. If there is no God or teleology, there is no such thing as the meaning of life. But this need not be the last word on the matter. In this paper, I ask what the benefits provided by a cosmic purpose are, and go on to argue that thinking of our lives in a (...) particular way—in terms of a unified life narrative—can supply us with many of those benefits. We might lose little if there is no such thing as the meaning of life, since there is still something that can provide much of what is valuable about it. (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)

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)

Many philosophers have suspected that the normative importance of morality depends on moral realism. In this paper, I defend a version of this suspicion: I argue that if teleological forms of moral realism, those that posit an objective purpose to human life, are true, then we gain a distinctive kind of reason to do what is morally required. I argue for this by showing that if these forms of realism are true, then doing what is morally required can provide a (...) life with meaning, which is a widespread human need. I also argue that rival meta-ethical views, like anti-realism or non-naturalist realism, cannot make morality meaning-conferring in this way. (shrink)

This article proposes a term structure model for dual-currency interest rate markets. The model assumes that volatility is a deterministic function of time alone. This volatility structure can reduce the dimension of the required state variables. An important special case is presented, which corresponds essentially to a Vasicek/Hull-White yield curve model in each currency. The model is very useful for pricing cross-currency derivatives.

Call ‘radical moral theorizing’ the project of developing a moral theory that not only tries to conform to our existing moral judgments, but also manifests various theoretical virtues: consistency, simplicity, explanatory depth, and so on. Many moral philosophers assume that radical moral theorizing does not require any particular metaethical commitments. In this paper, I argue against this assumption. The most natural justification for radical moral theorizing presupposes moral realism, broadly construed; in contrast, there may be no justification for radical moral (...) theorizing if moral anti-realism is true. (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)

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)

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)

Depending on whether we are somewhat tolerant of nearby error-possibilities or not, the safety condition on knowledge is open to a strong reading and a weak reading. In this paper, it is argued that induction and conjunction introduction constitute two horns of a dilemma for the safety account of knowledge. If we opt for the strong reading, then the safety account fails to account for inductive knowledge. In contrast, if we opt for the weak reading, then the safety account fails (...) to accommodate knowledge obtained via the method of conjunction introduction. (shrink)

It is a commonplace in economics that we should disregard sunk costs. The sunk cost effect might be widespread, goes the conventional wisdom, but we would be better off if we could rid ourselves of it. In this paper, I argue against the orthodoxy by showing that the sunk cost effect is often beneficial. Drawing on discussions of related topics in dynamic choice theory, I show that, in a range of cases, being disposed to honor sunk costs allows an agent (...) to mimic a resolute chooser, someone who adopts the best plan at the outset of a decision problem and sticks with it, even when resoluteness is unfeasible. I discuss several kinds of cases in which honoring sunk costs coincides with resolute choice. (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)

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 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)

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 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)

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)