Banking
The WWR in the tail: a Monte Carlo framework for CCR stress testing
A methodology to compute stressed exposures based on a Gaussian copula and mixture distributions is introduced
Funding arbitrages and optimal funding policy
Stochastic control can be used to manage a bank’s net asset income
Market-making in spot precious metals
A market-making framework is extended to account for metal markets’ liquidity constraints
A comparison of FX fixing methodologies
FX fixing outcomes are mostly driven by length of calculation window
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
CVA sensitivities, hedging and risk
A probabilistic machine learning approach to CVA calculations is proposed
Bridging the gap risk reloaded: modelling wrong-way risk and leverage
A model extends the counterparty risk calculation to include nonlinear and complex portfolios
Weighting for leverage
A credit exposure model for leveraged collateralised counterparties is presented
Rethinking P&L attribution for options
A buy-side perspective on how to decompose the P&L of index options is presented
Volatility shape-shifters: arbitrage-free shaping of implied volatility surfaces
Manipulating implied volatility surfaces using optimal transport theory has several applications
Infrequent MtM reduces neither value-at-risk nor backtesting exceptions
Frequency of repricing impacts volatility and correlation measures
SABR convexity adjustment for an arithmetic average RFR swap
A model-independent convexity adjustment for interest rate swaps is introduced
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
The carbon equivalence principle: minimising the cost to carbon net zero
A method to align incentives with sustainability in financial markets is introduced
Leveraged wrong-way risk
A model to assess the exposure to leveraged and collateralised counterparties is presented
Neural joint S&P 500/VIX smile calibration
A one-factor stochastic local volatility model can solve the joint calibration problem
Pricing the transition of Scope 3 emissions
A framework to measure banks’ costs associated with carbon emissions is proposed
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates is presented
Smile-consistent basket skew
An analytic approximation for the implied volatility surface of basket options is introduced
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately