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Arbitrage-Free Pricing of XVA for Options in Discrete Time

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Figure

Figure 1: Stock and replication portfolio modeled on a one-period binomial tree model.
Table 1: Joint Probability Distribution between Z 1 and Y 1 , with Z t ⊥ Y t Y 1 = Y 0 u Y Y 1 = Y 0 d Y
Figure 2: One-period model of length h = 1 illustrating a replication portfolio (l, b, ∆)
Figure 4: Illustration of stock movements and payoffs to the investor in a 4-period model.
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