This paper presents a natural extension of the LGM that keeps the affine structure and generates an implied volatility smile.
Bilateral trades would be valued and margined using LCH swap curves
Lingling Cao and Pierre Henry-Labordère implement Dupire's local volatility in interest rate models
Banks and funds may have limited set of counterparties on September 1
Non-cleared notional falls $36 trillion as costs and complexity grow
Regulatory capital savings offered by instant settlement of smart contracts on distributed ledgers
Capitalab removes €1.3 trillion notional, cutting capital requirements
Uncleared margin rules the driver; may also impact CME-LCH basis
Swap spread inversion contributed to derivatives losses of $2.7 billion in 2015
Gatarek, Jabłecki and Qu introduce a Dupire-like formula for swaptions
Numerix quant revolutionises negative rates modelling
Hedge fund thinks ETFs, Solvency II and capital ratios distort volatility markets
Official post-mortem considers claims that options hedging amplified October 15 move
Dealers query risk management, valuation and default management
This paper introduces a technique for pricing and risk measurement of portfolios containing swaption contracts in the presence of counterparty credit risk, under general market model and volatility assumptions.
Service is waiting for CFTC approval; dealers say they will approach with caution
Adjoint algorithmic differentiation is one of the principal innovations in risk management in recent times. Luca Capriotti and Jacky Lee show how this technique can be used to compute real-time risk for credit products, even those valued with fast semi-analytical...
Market is split on how to report volumes for multi-legged trades
Fast gammas for Bermudan swaptions