Banking
Counterparty trading limits revisited: from PFE to PFL
The potential future loss is proposed as a replacement for PFE
The Garch linear SDE: explicit formulas and the pricing of a quanto CDS
A new closed-form approximation is applied to quanto CDS pricing
Local stochastic volatility: shaken, not stirred
Dominique Bang introduces a novel LSV approach to term distribution modelling
Knocking out corridor variance
Amine Ahallal and Olaf Torne add a knock-out barrier to the standard corridor variance swap
The revised P&L attribution test and the suitability of new proposed thresholds
Montoro, Spinaci and Georgi assess the effectiveness of the FRTB’s P&L attribution test
Efficient Simm-MVA calculations for callable exotics
Algorithmic differentiation are used to simulate sensitivities to calculate MVA
Equity modelling with local stochastic volatility and stochastic discrete dividends
SocGen quants calibrate local stochastic volatility models with stochastic dividends
The swap market model with local stochastic volatility
An easy to calibrate and accurate swap market model is proposed
Discrete time stochastic volatility
Quant proposes faster model to price arbitrage-free swaptions
Rogue traders versus value-at-risk and expected shortfall
VAR and ES are ineffective to deter rogue trading
The present of futures
Fabio Mercurio introduces a new multi-curve model for pricing futures convexity adjustments
Foreign exchange correlation swap: problem solver or troublemaker?
A correlation structure is an important element in pricing products such as correlation swaps
American quantized calibration in stochastic volatility
Fiorin, Callegaro and Grasselli show how discretisation methods reduce computing time in high-dimensional problems
Pathwise XVA Greeks for early-exercise products
The calculation of XVA Greeks for portfolios with early-exercise products is discussed
Evolutionary algos for optimising MVA
Alexei Kondratyev and George Giorgidze apply two evolutionary algos to MVA optimisation
The FRTB’s P&L attribution-based eligibility test: an alternative proposal
Spinaci, Benigno, Fraquelli and Montoro propose two alternatives to the P&L attribution test
Local volatility from American options
De Marco and Henry-Labordère provide an approximation of American options in terms of the local volatility function
Optimising VAR and terminating Arnie-VAR
Albanese, Caenazzo and Syrkin show how full-revaluation VAR is more accurate and robust than sensitivity-based VAR measures
Calibrating Heston for credit risk
Marco de Innocentis and Sergei Levendorskiĭ describe a faster and more accurate method for market-implied calibration of the Heston model
Haircutting non-cash collateral
Wujiang Lou develops a parametric haircut model to conduct sensitivity tests and capture market liquidity risk
Extremely (un)likely: a plausibility approach to stress testing
CCP’s risk managers propose a framework for generating extreme but plausible stress scenarios
Local-stochastic volatility: models and non-models
Lorenzo Bergomi exposes a condition important to the use of LSV models in trading
Accounting for initial margin under IFRS 13
Chris Kenyon and Richard Kenyon show why initial margin should be part of the fair value of a derivative