Derivatives pricing
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”
Numerical valuation of derivatives in high-dimensional settings via partial differential equation expansions
This paper presents a new numerical approach to solving high-dimensional partial differential equations that arise in the valuation of exotic derivative securities. The resulting numerical solutions are carefully compared in terms of accuracy and run…
FVA models overstate costs – Risk.net poll
Just over two-thirds say the current FVA approach is wrong
Putting FVA in a cage
If banks can't standardise funding charges, accountants or regulators should step in
The black art of FVA, part III: a $4 billion mistake?
Quants argue banks are inflating FVA; Crédit Agricole among those weighing new approach
FVA: How six smaller banks do it
From ING to Danske Bank, regional players are taking part in the FVA debate, but practices are mixed
Cutting edge introduction: Funding holes in Black-Scholes
HSBC quant builds funding costs and haircuts into Black-Scholes option pricing formula
Funding in option pricing: the Black-Scholes framework extended
Wujiang Lou shows the impact of funding costs on option valuation
Goodbye Sonia flat: banks rethink swaps with bond collateral
Higher discount rate can cut payouts to in-the-money clients by millions
KVA: banks wrestle with the cost of capital
As the bank capital burden grows, dealers are trying to price in the associated costs
Credit Suisse takes Sfr279 million FVA loss
Credit Suisse becomes the fifteenth bank known to have taken an FVA charge
Cutting edge introduction: FVA out of balance
Some quants are arguing FVA should not be part of earnings
Pricing and hedging variance swaps on a swap rate
A pricing tool for fixed-income volatility products is introduced
KVA: capital valuation adjustment by replication
KVA are introduced to take into account the effect of capital on funding
Risk-neutral pricing – Hull and White debate Kenyon and Green
XVA specialists spark debate on regulation and risk-neutrality
Path-dependent volatility
Julien Guyon on path-dependent volatility models
Hedge funds seek third-party Emir valuations
Delegating Emir reporting may cause more problems than it solves