Cutting Edge
A sound modelling and backtesting framework for forecasting initial margin requirements
Anfuso, Aziz, Loukopoulos and Giltinan propose a method to develop and backtest forecasting models for IM
Does initial margin eliminate counterparty risk?
Andersen, Pykhtin and Sokol show the existence of residual exposure after initial margin posting
Managing energy market volumetric risk
Krzysztof Wolyniec presents a volumetric risk management model for energy markets
What to do about Libor?
Darrell Duffie explains why transition from Ibor-based benchmarks is necessary and feasible
Mixing SABR models for negative rates
Antonov, Konikov and Spector use an exact formula for the normal free boundary SABR to construct an arbitrage-free mixed SABR model
Fast and precautious: order controls for trade execution
Algo traders propose a new optimal execution algorithm with both limit and market orders
P&L attribution for energy portfolios with non-linear exposures
Carlos Blanco and Alessandro Mauro explain how non-linear P&L attribution tools can improve a company’s business intelligence capabilities
The covered interest parity conundrum
Darrell Duffie explains why it’s difficult to arbitrage direct and swap-implied funding rates
Optimal trading with linear and (small) non-linear costs
Bouchaud et al find the optimal trading strategy for a family of predictive signals in the presence of transaction costs
Derivatives funding, netting and accounting
Christoph Burgard and Mats Kjaer expand their semi-replication framework to multiple counterparties
Duffie: CCPs should prep to quash Sifi swap termination stays
Clearing houses need criteria for overriding stays on swap terminations, writes Darrell Duffie
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
Identification and capitalisation of non-modellable risk factors
Adolfo Montoro, Tim Becker and Lars Popken propose techniques for systematically capturing and categorising non-modellable risk factors and risk-adequate aggregation
FVA: off the mark
With adjustments to increase, Darrell Duffie says dealers should improve weak valuation practices
Crunching mortality and life insurance portfolios with extended CreditRisk+
Jonas Hirz, Uwe Schmock and Pavel Shevchenko present a summary of actuarial applications of the extended CreditRisk+ model
Systemic risks in CCP networks
Barker, Dickinson, Lipton and Virmani propose a credit and liquidity risk model for CCPs
Why the leverage ratio distorts market-making
Darrell Duffie argues the rule hurts market efficiency for very safe assets