Since the 2008-2009 financial crisis, banks have introduced a family of X-valuation adjustments (XVAs) to quantify the cost of counterparty risk and of its capital and funding implications. XVAs represent a switch of paradigm in derivative management, from hedging to balance sheet optimization....

Deep learning for option pricing has emerged as a novel methodology for fast computations with applications in calibration and computation of Greeks. However, many of these approaches do not enforce any no-arbitrage conditions, and the subsequent local volatility surface is never considered. In...

Abstract Based on an XVA analysis of centrally cleared derivative portfolios, we consider two capital and funding issues pertaining to the efficiency of the design of central counterparties (CCPs). First, we consider an organization of a clearing framework, whereby a CCP would also play the role...

The 2007 subprime crisis has induced a persistent disconnection between the Libor derivative markets of different tenors and the OIS market. Commonly proposed explanations for the corresponding spreads are a combination of credit risk and liquidity risk. However in the literature the meaning of...

No abstract received.

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 valuation adjustment (LVA) and replacement cost (RC) issues,...

We consider a bottom-up Markovian copula model of portfolio credit risk where dependence among credit names mainly stems from the possibility of simultaneous defaults. Due to the Markovian copula nature of the model, calibration of marginals and dependence parameters can be performed separately...