Technical paper/Convexity
Convexity adjustments à la Malliavin
This paper puts forward a novel means to approximate convexity adjustments in a general interest rate model using Malliavin calculcus.
Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
Valuation and risk management of vanilla Libor swaptions in a fallback
A procedure to price vanilla European Libor swaptions derived from the SABR model is presented
Nonlinear risk decomposition for any type of fund
A risk decomposition by fund manager, factor or instrument is proposed
A Darwinian theory of model risk
An ex ante methodology is proposed to analyse the model risk pattern for a broad class of structures
An end to replication
Convexity adjustments can be valued with an analytical formula, avoiding replication arguments
CCP discounting big bang: convexity adjustment
The collateral transition to SOFR will create convexity adjustments that need to be modelled
The present of futures
Fabio Mercurio introduces a new multi-curve model for pricing futures convexity adjustments
Tail protection for long investors: trend convexity at work
In this paper, the authors show that single-asset trend strategies have built-in convexity, provided their returns are aggregated over the right time scale, ie, that of the trend filter.
An enterprise perspective of performance attribution: introducing the keel model
In this paper, performance attribution is extended to an enterprise level based on the keel model. The keel model introduced here is applied to the problem of attributing enterprise value changes to various risk factors.
Collateral convexity complexity
Collateral convexity complexity
Quadratic Gaussian inflation
Quadratic Gaussian inflation
CMS: covering all bases
CMS: covering all bases
Constant maturity asset swap convexity correction
Constant maturity asset swap convexity correction
Cutting Edge introduction: viva cross-vegas
Viva cross-vegas
CMS: covering all bases
CMS: covering all bases
Smiling at convexity
The price of a constant maturity swap (CMS)-based derivative is largely determined by the value of swaption volatilities at extreme strikes. Fabio Mercurio and Andrea Pallavicini propose a simple procedure for stripping consistently implied volatilities…
Forward CMS rate adjustment
Constant maturity products