Related papers: Central Clearing Valuation Adjustment
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving…
Wrong-Way Risk (WWR) is an important component in Funding Valuation Adjustment (FVA) modelling. Yet, the standard assumption is independence between market risks and the counterparty defaults and funding costs. This typical industrial…
We compute the value of a variance swap when the underlying is modeled as a Markov process time changed by a L\'{e}vy subordinator. In this framework, the underlying may exhibit jumps with a state-dependent L\'{e}vy measure, local…
The research detailed in this paper scrutinizes Principal Component Analysis (PCA), a seminal method employed in statistics and machine learning for the purpose of reducing data dimensionality. Singular Value Decomposition (SVD) is often…
In the context of energy market clearing, non-merchant assets are assets that do not submit bids but whose operational constraints are included. Integrating energy storage systems as non-merchant assets can maximize social welfare. However,…
Exposure simulations are fundamental to many xVA calculations and are a nested expectation problem where repeated portfolio valuations create a significant computational expense. Sensitivity calculations which require shocked and unshocked…
Credit default poses significant challenges to financial institutions and consumers, resulting in substantial financial losses and diminished trust. As such, credit default risk management has been a critical topic in the financial…
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory…
We study the impact of exchange rate volatility on cost efficiency and market structure in a cross-section of banks that have non-trivial exposures to foreign currency (FX) operations. We use unique data on quarterly revaluations of FX…
The popularity of Conditional Value-at-Risk (CVaR), a risk functional from finance, has been growing in the control systems community due to its intuitive interpretation and axiomatic foundation. We consider a nonstandard optimal control…
This paper addresses the estimation of the systemic risk measure known as CoVaR, which quantifies the risk of a financial portfolio conditional on another portfolio being at risk. We identify two principal challenges: conditioning on a…
This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with…
We build the time series of optimal realized portfolio weights from high-frequency data and we suggest a novel Dynamic Conditional Weights (DCW) model for their dynamics. DCW is benchmarked against popular model-based and model-free…
We investigate the welfare loss of continuous and discrete order matching models in blockchain-based decentralized exchanges (DEX) that utilize order books to record outstanding orders. Continuous processing matches each incoming…
In this paper, we have studied the pricing of a continuously collateralized CDS. We have made use of the "survival measure" to derive the pricing formula in a straightforward way. As a result, we have found that there exists irremovable…
Companies across the globe are keen on targeting potential high-value customers in an attempt to expand revenue and this could be achieved only by understanding the customers more. Customer Lifetime Value (CLV) is the total monetary value…
KV Cache is commonly used to accelerate LLM inference with long contexts, yet its high memory demand drives the need for cache compression. Existing compression methods, however, are largely heuristic and lack dynamic budget allocation. To…
We consider a new approach to portfolio selection in presence of transaction costs which allows to map the problem into one without costs. The proposed approach connects all the quantities of interest to exit times and probabilities to…
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…
We discuss the binary nature of funding impact in derivative valuation. Under some conditions, funding is either a cost or a benefit, i.e., one of the lending/borrowing rates does not play a role in pricing derivatives. When derivatives are…