Related papers: Binary Funding Impacts in Derivative Valuation
Financial companies continuously analyze the state of the markets to rethink and adjust their investment strategies. While the analysis is done on the digital form of data, decisions are often made based on graphical representations in…
The importance of counterparty credit risk to the derivative contracts was demonstrated consistently throughout the financial crisis of 2008. Accurate valuation of Credit value adjustment (CVA) is essential to reflect the economic values of…
In cryptocurrency markets, a key challenge for perpetual future issuers is maintaining alignment between the perpetual future price and target value. This study addresses this challenge by exploring the relationship between funding rates…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate…
This paper examines the relationship between Inverse Perpetual Swap contracts, a Bitcoin derivative akin to futures and the margin funding interest rates levied on BitMEX. This paper proves the Heteroskedastic nature of funding rates and…
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,…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…
In this note we sketch an initial tentative approach to funding costs analysis and management for contracts with bilateral counterparty risk in a simplified setting. We depart from the existing literature by analyzing the issue of funding…
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…
We analyze the counterparty risk embedded in CDS contracts, in presence of a bilateral margin agreement. First, we investigate the pricing of collateralized counterparty risk and we derive the bilateral Credit Valuation Adjustment (CVA),…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
Credit value adjustment (CVA) is the charge applied by financial institutions to the counterparty to cover the risk of losses on a counterpart default event. In this paper we estimate such a premium under the Bates stochastic model (Bates…
In decision problems under incomplete information, actions (identified to payoff vectors indexed by states of nature) and beliefs are naturally paired by bilinear duality. We exploit this duality to analyze the value of information, using…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
We consider a specific type of nonlinear partial differential equations (PDE) that appear in mathematical finance as the result of solving some optimization problems. We review some existing in the literature examples of such problems, and…
A natural and often used strategy when testing software is to use input values at boundaries, i.e. where behavior is expected to change the most, an approach often called boundary value testing or analysis (BVA). Even though this has been a…
We develop a framework for computing the total valuation adjustment (XVA) of a European claim accounting for funding costs, counterparty credit risk, and collateralization. Based on no-arbitrage arguments, we derive backward stochastic…
We depart from the usual methods for pricing contracts with the counterparty credit risk found in most of the existing literature. In effect, typically, these models do not account for either systemic effects or at-first-default contagion…
The marginal price of electricity traditionally depends on the dual variables associated with relevant optimization goals. Particularly, in the optimal power flow realm, prices represent the cost of supplying an additional unit of power at…
The goal of this work is to develop deep learning numerical methods for solving option XVA pricing problems given by non-linear PDE models. A novel strategy for the treatment of the boundary conditions is proposed, which allows to get rid…