Counterparty Credit Risk Evaluation for Accumulator Derivatives: the Brownian Local Time Approach

Abstract: In this paper we aim at exploiting the properties of the Brownian Local Time to estimate the Counterparty Credit Risk for a specific class of financial derivatives, i.e. the so called Accumulator derivatives, within a Black and Scholes-type market. The comparison with the results obtained by made use of a standard Monte Carlo approach, clearly shows the superiority of our proposal, which runs in smaller execution times and with better estimation accuracy.