In this paper we consider the valuation of total return swaps (TRS). Since a total return swap is a collateralized derivative referencing the value process of an uncollateralized asset it is in general not possible that both counter parties agree on a unique value. Consequently it is not...

We consider the valuation and risk management of derivatives on defaultable assets such as bonds taking into account funding (FVA), cash collateral, underlying default, counterparty default (CVA) and default correlation using joint default poisson process. The framework can be considered as an...

On September 15, 2008, the US investment bank Lehman Brothers filed for bankruptcy. Ten years later some claims still remain unsettled.Although Lehman's derivative portfolio was not the reason for its bankruptcy, its notional of $35 trillion accounted for 5% of the total derivative market....

This presentation motivates the concept of smart derivative contracts. Inspired by smart contracts from distributed ledger technology, we define a derivative contract with an automatic termination feature

In this note we describe the application of existing smart contract technologies with the aim to construct a new digital representation of a financial derivative contract. We compare several existing DLT based technologies. We provide a detailed description of two separate prototypes which are...

By introducing a funding cost component like a funding valuation adjustment (FVA) into the valuation of derivatives, the replication strategy inherent in the valuation approach needs to be reflected in the real management of the position. Whilst in theory the replication takes place in one self...

In this note we describe a smart derivative contract with a fully deterministic termination to remove many of the inefficiencies in collateralized OTC transactions. The automatic termination procedure embedded in the smart contracts replaces the counterparty default by an option right of the...