Related papers: CVA for Bilateral Counterparty Risk under Alternat…

This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…

In this paper we revisit Burnett (2021) \& Burnett and Williams (2021)'s notion of hedging valuation adjustment (HVA), originally intended to deal with dynamic hedging frictions such as transaction costs, in the direction of model risk. The…

This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted…

We study the problem of finding the worst-case joint distribution of a set of risk factors given prescribed multivariate marginals and a nonlinear loss function. We show that when the risk measure is CVaR, and the distributions are…

The conditional value-at-risk (CVaR) is a useful risk measure in fields such as machine learning, finance, insurance, energy, etc. When measuring very extreme risk, the commonly used CVaR estimation method of sample averaging does not work…

In this paper a class of combinatorial optimization problems is discussed. It is assumed that a solution can be constructed in two stages. The current first-stage costs are precisely known, while the future second-stage costs are only known…

During the COVID-19 pandemic, many institutions have announced that their counterparties are struggling to fulfill contracts.Therefore, it is necessary to consider the counterparty default risk when pricing options. After the 2008 financial…

Conformal prediction provides rigorous distribution-free finite-sample guarantees for marginal coverage under the assumption of exchangeability, but may exhibit systematic undercoverage or overcoverage for specific subpopulations. Assessing…

Bilateral CVA as currently implement has the counterintuitive effect of profiting from one's own widening CDS spreads, i.e. increased risk of default, in practice. The unified picture of CVA and liquidity introduced by Morini & Prampolini…

We show how to restructure the counterparty risk faced by the originator of a securitization or covered bond arising from an interest rate hedging swap assisted by a "one-way" collateral agreement. This risk emerges when the swap is…

Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…

In recent years, a CRA (Credit Risk Analysis) quantum algorithm with a quadratic speedup over classical analogous methods has been introduced. We propose a new variant of this quantum algorithm with the intent of overcoming some of the most…

Absence-of-Arbitrage (AoA) is the basic assumption underpinning derivatives pricing theory. As part of the OTC derivatives market, the CDS market not only provides a vehicle for participants to hedge and speculate on the default risks of…

We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…

Risk measure forecast and model have been developed in order to not only provide better forecast but also preserve its (empirical) property especially coherent property. Whilst the widely used risk measure of Value-at-Risk (VaR) has shown…

We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…

We study the problem of valuing and hedging a vulnerable derivative claim with bilateral cash flows between two counterparties in the presence of asymmetric funding costs, defaults and wrong way risk (WWR). We characterize the pre-default…

We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…

In many sequential decision-making problems we may want to manage risk by minimizing some measure of variability in costs in addition to minimizing a standard criterion. Conditional value-at-risk (CVaR) is a relatively new risk measure that…

In real-world scenarios, risk-averse learning is valuable for mitigating potential adverse outcomes. However, the delayed feedback makes it challenging to assess and manage risk effectively. In this paper, we investigate risk-averse…