New Method Reveals Impact of Settlement Values on Counterparty Risk
The article explores a new way to calculate the value of contracts when there is a risk that the other party might not fulfill their obligations. The researchers suggest a method that considers different ways contracts can be settled in case of default. They found that the specific terms of how a contract is settled can significantly affect the calculated value of the contract. This highlights the importance of using more advanced models to accurately reflect the complexities of financial agreements and the market conditions.