Technical paper
A quadratic volatility Cheyette model
A quadratic volatility Cheyette model
Smile in the low moments
Smile in the low moments
Lois: credit and liquidity
The spread between Libor and overnight index swap rates used to be negligible – until the crisis. Its behaviour since can be explained theoretically and empirically by a model driven by typical lenders’ liquidity and typical borrowers’ credit risk. By…
Cutting Edge introduction: Continuity error
Continuity error
SABR goes normal
SABR goes normal
Lois: credit and liquidity
Lois: credit and liquidity
Risk control
Setting the target
LPI swaps with a smile
LPI swaps with a smile
Bilateral CVA of optional early termination clauses
Bilateral CVA of optional early termination clauses
Cutting Edge introduction: The collateral currency convexity problem
The collateral currency convexity conundrum
Collateral convexity complexity
Collateral convexity complexity
Applied risk management series: Venturing beyond VAR
Venturing beyond historical VAR
LPI swaps with a smile
LPI swaps with a smile
Defined benefit pension strategy with stochastic volatility
Defined benefit pension strategy with stochastic volatility
Cutting Edge introduction: CVA for CDSs
Counterparty risk is generally thought of at a portfolio level, but understanding how a particular payout interacts with credit and debit valuation adjustments could help banks make business decisions. Laurie Carver introduces this month’s technical…
Wrong-way risk, credit and funding
The risk of exposure and counterparty default probability both increasing – so-called wrong-way risk – is usually understood in terms of the correlation between the two variables. But this approach focuses more on the centre of the distribution. This…