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Interest rate swap credit valuation adjustment

Černý, Jakub; Witzany, Jiří - 2014

The credit valuation adjustment (CVA) of OTC derivatives is an important part of the Basel III credit risk capital … of the derivative, but also the probability of default of a counterparty. Another complication arises in the calculation … needed to incorporate the wrong-way risk. A semi-analytical CVA formula simplifying the interest rate swap (IRS) valuation …

Persistent link: https://www.econbiz.de/10010358352

Hedging Volatility Risk of Exotic Structures Using Variance Derivatives

Zarov, Iliyan Radev - 2012

We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic volatility jump diffusion model

Persistent link: https://www.econbiz.de/10013113731

Options and Risk

Bruno, Giovanni - 2020

' prices, expected returns, risk exposure, and optimal exercise policies respond to variations in the risk exposure of the … underlying asset. The model allows one to separate the effects from changes in idiosyncratic versus systematic risk. Among the … new insights we establish are that i) call prices typically respond negatively to increases in systematic risk, ii) the …

Persistent link: https://www.econbiz.de/10012830325

Option Pricing in an Investment Risk-Return Setting

Kim, Young Shin - 2019

's optimal mean-variance portfolio and the amount of unhedged risk prior to maturity. Solutions assuming the cases where the …

Persistent link: https://www.econbiz.de/10012865720

Pricing interest rate derivatives under volatility uncertainty

Holzermann, Julian - 2020

We study the pricing of contracts in fixed income markets in the presence of volatility uncertainty. We consider an arbitrage-free bond market under volatility uncertainty. The uncertainty about the volatility is modeled by a G-Brownian motion, which drives the forward rate dynamics. The absence...

Persistent link: https://www.econbiz.de/10012175590

Path-Dependent Options Pricing : A Quasi Monte Carlo Simulation Approach with MATLAB

Au Yeung, Jay - 2010

This paper presents a tailor-made discrete-time simulation model for valuing path-dependent options, such as lookback option, barrier option and Asian option. In the context of a real-life application that is interest to many students, we illustrate the option pricing by using Quasi Monte Carlo...

Persistent link: https://www.econbiz.de/10013139321

Pricing a Credit-Linked Note on a CDX Tranche

Chertok, Daniel L. - 2012

A credit-linked note (CLN) on a tranche of the CDX index (partially) protects the holder against default losses in that tranche. The holder receives a specified redemption amount at note maturity. The note is priced using market spread quotes for a matching CDS on this tranche

Persistent link: https://www.econbiz.de/10013098210

Valuation of a Cashflow CDO Without Monte Carlo Simulation

Gallagher, Donal A. - 2009

Unlike tranches of synthetic CDOs, that depend only on the defaults of the underlying securities, tranches of cashflow CDOs also depend on the interest cash flows from the coupons of the securities. Whilst fast, accurate, (semi-)analytic methods exist for pricing synthetic CDO tranches (Hull and...

Persistent link: https://www.econbiz.de/10013156360

Options pricing by Monte Carlo simulation, binomial tree and BMS model : a comparative study

Bendob, Ali; Bentouir, Naima - In: Journal of banking and financial economics 1 (2019) 11, pp. 79-95

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...

Persistent link: https://www.econbiz.de/10012115106

Pricing Contingent Convertibles : A Derivatives Approach

De Spiegeleer, Jan - 2019

This article provides an in-depth analysis of pricing and structuring of contingent convertibles (CoCos). These debt instruments convert into the equity of the issuing bank or suffer a write-down of the face value upon the appearance of a trigger event. This trigger mechanism provides an...

Persistent link: https://www.econbiz.de/10012905917