Technical papers / Asia Risk
The value of early termination clauses in derivatives depends crucially on the type of close-out value used and on the counterparty risk, and embeds optionality in even the most vanilla swap contracts....
Insurance Risk and BNY Mellon have conducted a survey to look at how insurance companies are preparing for the new regime and the opportunities and challenges that the changes will bring.
More Technical papers / Asia Risk articles
Marking whole positions to the current clearing price as in mark-to-market accounting ignores the effect that liquidating a position can have. Such valuations overstate the cash that will be received and underestimate a position’s leverage. Simple parametric...
Some have argued that the debit valuation adjustment – which measures the benefit to a bank from its own potential for default – is monetisable. They claim replication strategies involving the dealer buying its own bonds, or writing protection on...
Asset returns are well known to be fat-tailed, but widely used classical econometric techniques are not well suited for building such distributions. Craig Friedman, Yangyong Zhang and Wenbo Cao use a minimum relative utility-based entropy principle to...
Covariance swaps that track the covariance of assets can be difficult to hedge because there is no known static replication formula, unlike the case for variance swaps. However, in the case of swaps measuring the covariance between the absolute returns...
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...
Guido Giese derives a model for the performance and risk analysis of algorithmic investment strategies that invest in a mixed portfolio of the equity and money markets. It is based on a frequent rebalancing algorithm that responds to changes in volatility...
This paper discusses a number of diverse considerations that risk managers need to incorporate into their thought processes and recurring procedures if they are to fulfill their role more effectively in the future
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