We develop a straightforward procedure to price derivatives by a bivariate tree when the underlying process is a jump-diffusion. Probabilities and jump sizes are derived by matching higher order ...

Interest rate derivatives under jump-extended short-rate models have commonly been valued using lattice methods. Unfortunately, lattice methods have pitfalls, mainly in terms of accuracy, efficiency ...

We derive a partial differential equation (PDE) representation for the value of financial derivatives with bilateral counterparty risk and funding costs. The model is very general in that the funding ...