Bilateral CVA of optional early termination clauses
The risk of exposure and counterparty default probability both increasing – so-called wrong-way risk – is usually understood in terms of the correlation between the two variables. But this approach focuses more on the centre of the distribution. This...
DVA for assets
Closing out DVA
Impact-adjusted valuation and the criticality of leverage
The impossibility of DVA replication
Fat tails via utility-based entropy
An easy-to-hedge covariance swap
The credit valuation adjustment (CVA) capital charge in Basel III comes in two flavours: advanced (simulations) and standardised (formula). In this article, Michael Pykhtin shows that the standardised CVA charge formula can be obtained by adding several...
Optimal design of algo-alpha trading strategies
Stress testing with fully flexible causal inputs
Valuation of commodity structures in co-integrated futures markets
Full implications for CMS convexity
Repricing the cross smile: an analytic joint density
Analytical risk contributions for non-linear portfolios
Conversion of upfront CVA into running CVA
Funding cost adjustments for derivatives
Filling the gaps
Spread options, Farkas's lemma and linear programming
Marking systemic portfolio risk with the Merton model
From spot volatilities to implied volatilities
Alexandre Antonov and Michael Spector present an analytical approximation of zero-coupon bonds and swaption prices for general short-rate models. The approximation is based on regular and singular expansions with respect to low volatility and contains...
Risky funding with counterparty and liquidity charges