Derivatives pricing
Japanese banks eye phased CVA introduction
Working group reports “growing need” for valuation adjustment but cherry-picking fears persist
Buy side unimpressed with Mifid II cost transparency rules
Clients question value of receiving dealers’ swaps profit margin data
Bounding Bermudans
Thomas Roos derives model-independent bounds for amortising and accreting Bermudan swaptions
Japan CVA shift may break local banks’ swaps stranglehold
Introduction of pricing adjustment could see foreign banks compete for corporate business
Variation margin relief sparks swaps pricing disputes
Banks divided over whether to price trades using current CSAs or theoretical new agreements
What is the economic value of FVA?
To end the funding valuation adjustment debate, this key question needs to be answered
Derivatives funding, netting and accounting
Christoph Burgard and Mats Kjaer expand their semi-replication framework to multiple counterparties
FVA: off the mark
With adjustments to increase, Darrell Duffie says dealers should improve weak valuation practices
Gap risk KVA and repo pricing
Wujiang Lou introduces a reserve capital approach to the hedging error in the BSM model
Dealers predict ‘softening’ of NSFR in Europe
Some banks' pricing already assumes rule will be watered down
Banks take flexible approach to pricing netting risks
Dealers are adjusting CVA prices, depending on their view of the legal netting opinion
Netting risks create pricing and operational headaches
Oversight of legal risks is not always robust
Time to gear up for MVA
Banks must be prepared for the looming rise of non-cleared margin requirements
Deriving derivatives
Andrei Soklakov shows how to incorporate traditional investment ideas and clients’ views into structured product design
Change is the only constant in pricing swaps
Regulation is having unexpected effects on derivatives unwinds
NSFR to hike hedging costs for end-users, industry warns
Costs could increase by 10–15%, House Agriculture Committee hears
XVAs: a gap between theory and practice
Hull and White see splits on FVA, MVA, KVA as irreconcilable
New research shows FVA is not part of P&L – Duffie
Pricing experts defend practices that resulted in huge FVA losses
Accelerated trinomial trees applied to American basket options and American options under the Bates model
This paper introduces accelerated trinomial trees, a novel efficient lattice method for the numerical pricing of derivative securities.
Managing XVAs: from whack-a-mole to Mortal Kombat
Joined-up effort to tackle XVAs reflects growing impact of derivatives valuation adjustments
FVA sceptics lose ground in valuation debate
Market needs to move on from theoretical argument and focus on numbers
Mifid II price tiering guidance unlikely, say dealers
Banks warn vague rules "like the Rorschach test" and need clarification
US regulator asks banks for FVA information
OCC requests info on funding spreads, model validation and more
Citi exec laments plight of the quants
Quant Congress USA: Quant departments have become “sterile” and “dumbed-down”