Risk magazine/Technical paper
A triptych approach for reverse stress testing of complex portfolios
Pascal Traccucci et al present an extended reverse stress test triptych approach with three variables
Central counterparty CVA
Matthias Arnsdorf proposes a method to calculate the counterparty risk related to CCP membership
Tying allocation to selection
Hamza Bahaji introduces a new approach to core-satellite investing, the compound portfolio insurance
The interplay between stochastic volatility and correlations in equity autocallables
Study shows issues with pricing autocallables using SLV
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
Black was right: price is within a factor 2 of value
CFM’s quants verify Fisher Black’s intuition on mean reversion still applies today
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
The swap market model with local stochastic volatility
An easy to calibrate and accurate swap market model is proposed
Emerging market corporate bonds as first-to-default baskets
Modified Merton model offers insights on EM corporate debt
Curve dynamics with artificial neural networks
Artificial neural networks can replace PCA for yield curves analysis
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
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
Using derivatives to forecast oil scenarios
Generating probability-weighted oil price scenarios from traded derivatives prices can help risk managers in the industry