Cutting Edge
Modelling the financial risks of wind generation with Weibull
The manner in which wind generation can affect the half-hourly APX price is discussed
Cutting edge introduction: Expanding collateral options
Two RBC quants propose a way to value CSAs with more than two currency posting options
A non-linear PDE for XVA by forward Monte Carlo
Vladimir Piterbarg considers a non-linear partial differentiation equation that appears in a number of XVA-related contexts, including a one-way credit-support annex, credit value adjustment with risky closeout, option pricing with differential borrowing…
Collateral option valuation made easy
Vladimir Sankovich and Qinghua Zhu develop a method to value cheapest-to-deliver option embedded in CSAs
Cutting Edge introduction: Sticky SABR
Quants develop a hassle-free model that can handle negative interest rates
Wrong-way risk done right
Jacky Lee and Luca Capriotti present an arbitrage-free valuation method for counterparty exposure of credit derivates portfolios.
The free boundary SABR: natural extension to negative rates
Antonov, Konikov and Spector adapt the popular SABR model to a negative rates environment
Internal transfer price optimisation for integrated energy firms
A framework that demonstrates optimal internal pricing will deviate from ‘arm’s length principle'
Cutting Edge introduction: Law-abiding FVA
HSBC quant develops an FVA model that preserves the law of one price
Efficient XVA management: pricing, hedging and allocation
Kenyon and Green show how certain technical elements simplify XVA management
CVA and FVA with liability-side pricing
Wujiang Lou calculates CVA and FVA abiding by the law of one price
Cutting Edge: Co-simulation of risk factors in power markets
A simple but realistic model to co-simulate the time series of temperature, electricity load and prices is proposed
Cutting edge introduction: Adjoints - maintaining the legacy
Quants at UBS show how to speed up the calculation of sensitivities without tearing up legacy code
American options: time-critical pricing
Time constraints can be binding for ‘heavy’ Monte Carlo calculations of risk analytics – value-at-risk, potential future exposure, credit valuation adjustment – in intraday risk monitoring, so fast approximations are sometimes preferred. Vladislav…
Greeks with continuous adjoints: fast to code, fast to run
Marzio Sala and Vincent Thiery show the derivation of the continuous adjoint problem for PDEs
Quant ideas: Do we need realistic models?
Realistic models not necessarily a prerequisite for successful risk management