Technical paper/Derivatives
Second-order Monte Carlo sensitivities
This paper considers the problem of efficiently computing the full matrix of second-order sensitivities of a Monte Carlo price when the number of inputs is large.
Stay ahead of the fixing lag
The price of fund-linked derivatives depends on the fixing lag of the underlying funds
Complexity reduction for calibration to American options
In this paper, the authors propose and investigate a new method for the calibration to American option price data.
Reducing margin procyclicality at central counterparties
This paper studies the effect of less procyclical margin models on cleared volumes and risk taking in a stylized CCP.
Polynomial upper and lower bounds for financial derivative price functions under regime-switching
In this paper, the authors present a new approach to bounding financial derivative prices in regime-switching market models from both above and below.
Distributed ledger technology in payments, clearing and settlement
This paper examines how DLT can be used in the area of PCS, and identifies both the opportunities and challenges associated with its long-term implementation and adoption.
Central counterparties and systemic stability
The paper is the text of a keynote address by Marc Bayle de Jessé presented at the conference.
Foreign exchange correlation swap: problem solver or troublemaker?
A correlation structure is an important element in pricing products such as correlation swaps
Optimal equity protection of Solvency II regulated portfolios
In the context of equity investments, this paper examines the relationship between the cost of acquiring protection (in the form of put option) and the reduction of capital charges that it entails. The paper develops the idea that Solvency II regulations…
Local volatility from American options
De Marco and Henry-Labordère provide an approximation of American options in terms of the local volatility function
Asset price bubbles and risk management
The purpose of this paper is to review the literature on asset price bubbles to study the impact that the existence of bubbles has on standard risk management methodologies.
Using derivatives to forecast oil scenarios
Generating probability-weighted oil price scenarios from traded derivatives prices can help risk managers in the industry
Accounting for initial margin under IFRS 13
Chris Kenyon and Richard Kenyon show why initial margin should be part of the fair value of a derivative
Elasticity theory of structuring
Andrei Soklakov presents a product design theory that incorporates Bayesian information processing and risk aversion
A map of collateral uses and flows
This paper provides insights into the increased demand for collateral, the reduced capacity for banks to act as collateral intermediaries and examples of risks and vulnerabilities in collateral flows.
Gap risk KVA and repo pricing
Wujiang Lou introduces a reserve capital approach to the hedging error in the BSM model
The role of collateral in supporting liquidity
This paper focuses on the use of high-quality assets for collateral purposes.
Interest rate models enhanced with local volatility
Lingling Cao and Pierre Henry-Labordère implement Dupire's local volatility in interest rate models
Deriving derivatives
Andrei Soklakov shows how to incorporate traditional investment ideas and clients’ views into structured product design
MVA transfer pricing
Wujiang Lou extends liability-side pricing theory to initial margin
Pricing options on trend-stationary currencies: applications to the Chinese yuan
This paper derives a closed-form version of a model with a trend-stationary, stochastic volatility exchange rate, using both a linear and quadratic trend.
Outperforming benchmarks with their derivatives: theory and empirical evidence
This paper looks for optimal explicit constructions and empirical tests in regards to pricing and hedging derivatives with coherent risk measures.
Non-parametric local volatility formula for interest rate swaptions
Gatarek, Jabłecki and Qu introduce a Dupire-like formula for swaptions
Hedging error measurement for imperfect strategies
Jack Baczynski, Jonathan da Silva and Rosalino Junior present an index for measuring hedging errors