Related papers: Central Clearing Valuation Adjustment
Traditional control-flow analysis (CFA) for higher-order languages, whether implemented by constraint-solving or abstract interpretation, introduces spurious connections between callers and callees. Two distinct invocations of a function…
CVaR (Conditional Value at Risk) is a risk metric widely used in finance. However, dynamically optimizing CVaR is difficult since it is not a standard Markov decision process (MDP) and the principle of dynamic programming fails. In this…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
The effect of self-default on the valuation of liabilities and derivatives (DVA) has been widely discussed but the effect on assets has not received similar attention. Any asset whose value depends on the status, or existence, of the firm…
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…
Multi-view learning (MVL) is a strategy for fusing data from different sources or subsets. Canonical correlation analysis (CCA) is very important in MVL, whose main idea is to map data from different views onto a common space with maximum…
This paper provides intuition on the relationship of accrual and mark-to-market valuation for cash and forward interest rate trades. Discounted cashflow valuation is compared to spread-based valuation for forward trades, which explains the…
In this paper we address the problem of decision making within a Markov decision process (MDP) framework where risk and modeling errors are taken into account. Our approach is to minimize a risk-sensitive conditional-value-at-risk (CVaR)…
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 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,…
Due to the mechanism of recording, the presence of multiple transactions at each recording time becomes a common feature for high-frequency data in financial market. Using random matrix theory, this paper considers the estimation of…
Generalized cross validation (GCV) is one of the most important approaches used to estimate parameters in the context of inverse problems and regularization techniques. A notable example is the determination of the smoothness parameter in…
Motivated by the equations of cross valuation adjustments (XVAs) in the realistic case where capital is deemed fungible as a source of funding for variation margin, we introduce a simulation/regression scheme for a class of anticipated…
We propose a model for price formation in financial markets based on clearing of a standard call auction with random orders, and verify its validity for prediction of the daily closing price distribution statistically. The model considers…
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is…
In this paper, a new way to integrate volatility information for estimating value at risk (VaR) and conditional value at risk (CVaR) of a portfolio is suggested. The new method is developed from the perspective of Bayesian statistics and it…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward…
In this paper we propose a general derivative pricing framework which employs decoupled time-changed (DTC) L\'evy processes to model the underlying asset of contingent claims. A DTC L\'evy process is a generalized time-changed L\'evy…
In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…
In this paper we investigate the relationship between Funding Value Adjustment (FVA) and Net Stable Funding Ratio (NSFR). FVA is defined in a consistent way with NSFR such that the new framework of FVA monitors the costs due to keeping NSFR…