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Feynman–Kac for functional jump diffusions with an application to Credit Value Adjustment


  • Kromer, E.
  • Overbeck, L.
  • Röder, J.A.L.


We provide a proof for the functional Feynman–Kac theorem for jump diffusions with path-dependent coefficients and apply our results to the problem of Credit Value Adjustment (CVA) in a bilateral counterparty risk framework. We derive the corresponding functional CVA-PIDE and extend existing results on CVA to a setting which enables the pricing of path-dependent derivatives.

Suggested Citation

  • Kromer, E. & Overbeck, L. & Röder, J.A.L., 2015. "Feynman–Kac for functional jump diffusions with an application to Credit Value Adjustment," Statistics & Probability Letters, Elsevier, vol. 105(C), pages 120-129.
  • Handle: RePEc:eee:stapro:v:105:y:2015:i:c:p:120-129
    DOI: 10.1016/j.spl.2015.06.007

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    References listed on IDEAS

    1. Levental, Shlomo & Schroder, Mark & Sinha, Sumit, 2013. "A simple proof of functional Itô’s lemma for semimartingales with an application," Statistics & Probability Letters, Elsevier, vol. 83(9), pages 2019-2026.
    2. Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
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    Cited by:

    1. Frank Bosserhoff & Mitja Stadje, 2019. "Mean-variance hedging of unit linked life insurance contracts in a jump-diffusion model," Papers 1908.05534,
    2. Frank Bosserhoff & Mitja Stadje, 2019. "Robustness of Delta hedging in a jump-diffusion model," Papers 1910.08946,


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