Related papers: Environmental CVA with K-Robust Wrong-Way Risk
We consider the problem of computing the Credit Value Adjustment ({CVA}) of a European option in presence of the Wrong Way Risk ({WWR}) in a default intensity setting. Namely we model the asset price evolution as solution to a linear…
Conditional Value-at-Risk (CVaR) is a widely used risk metric in applications such as finance. We derive concentration bounds for CVaR estimates, considering separately the cases of light-tailed and heavy-tailed distributions. In the…
The credit crisis and the ongoing European sovereign debt crisis have highlighted the native form of credit risk, namely the counterparty risk. The related Credit Valuation Adjustment, (CVA), Debt Valuation Adjustment (DVA), Liquidity…
In this paper, we develop a theoretical framework for bounding the CVaR of a random variable $X$ using another related random variable $Y$, under assumptions on their cumulative and density functions. Our results yield practical tools for…
A positive correlation between exposure and counterparty credit risk gives rise to the so-called Wrong-Way Risk (WWR). Even after a decade of the financial crisis, addressing WWR in both sound and tractable ways remains challenging.…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
The growing use of model-selection principles in ecology for statistical inference is underpinned by information criteria (IC) and cross-validation (CV) techniques. Although IC techniques, such as Akaike's Information Criterion, have been…
Credit (CVA), Debit (DVA) and Funding Valuation Adjustments (FVA) are now familiar valuation adjustments made to the value of a portfolio of derivatives to account for credit risks and funding costs. However, recent changes in the…
In March 2020, the world was thrown into financial distress. This manifested itself in increased uncertainty in the financial markets. Many interest rates collapsed, and funding spreads surged significantly, which increased due to the…
A critical problem in the financial world deals with the management of risk, from regulatory risk to portfolio risk. Many such problems involve the analysis of securities modelled by complex dynamics that cannot be captured analytically,…
In the aftermath of the 2007 global financial crisis, banks started reflecting into derivative pricing the cost of capital and collateral funding through XVA metrics. Here XVA is a catch-all acronym whereby X is replaced by a letter such as…
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…
Credit Valuation Adjustment (CVA) pricing models need to be both flexible and tractable. The survival probability has to be known in closed form (for calibration purposes), the model should be able to fit any valid Credit Default Swap (CDS)…
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 we discuss the issue of computation of the bilateral credit valuation adjustment (CVA) under rating triggers, and in presence of ratings-linked margin agreements. Specifically, we consider collateralized OTC contracts, that…
Five life cycle assessment (LCA) methods to calculate a project s environmental value are described: (a) process-based, (b) hybrid, (c) pseudo, (d) simplified, and (e) parametric. This paper discusses in detail and compares the two methods…
Although the fundamental probabilistic theory of extremes has been well developed, there are many practical considerations that must be addressed in application. The contribution of this thesis is four-fold. The first concerns the choice of…
The problem of finding the optimal portfolio for investors is called the portfolio optimization problem. Such problem mainly concerns the expectation and variability of return (i.e., mean and variance). Although the variance would be the…
We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit…
Firms should keep capital to offer sufficient protection against the risks they are facing. In the insurance context methods have been developed to determine the minimum capital level required, but less so in the context of firms with…