Technical paper/Interest rate swaps
Estimating mean reversions in interest rate models
The speed of factors’ mean reversion in rate models is estimated
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
Capturing the effects of climate change on CVA and FVA
A framework to incorporate climate change risk into derivative prices is presented
Multi-curve Cheyette-style models with lower bounds on tenor basis spreads
A solution for a no-arbitrage condition in Cheyette-style models is proposed
Benchmark reform goes non-linear
Terminating Libor will bring great challenges to the pricing of non-linear rate products
The swap market Bergomi model
The combination of two popular volatility models sharpens the hedging of exotic rate derivatives
Evaluating the credit exposure of interest rate derivatives under the real-world measure
This paper examines the credit exposure evaluation properties of interest rate derivatives to manage counterparty credit risk, working with the real-world probability.
Curve dynamics with artificial neural networks
Artificial neural networks can replace PCA for yield curves analysis
A copula approach to credit valuation adjustment for swaps under wrong-way risk
This paper deals with the credit valuation adjustment (CVA) of interest rate swap (IRS) contracts in the presence of an adverse dependence between the default time and interest rates: so-called wrong-way risk (WWR).
XVA at the exercise boundary
Andrew Green and Chris Kenyon show how the decision to exercise an option is influenced by XVAs
Downgrade termination costs
Downgrade termination costs
Conversion of upfront CVA into running CVA
Conversion of upfront CVA into running CVA
Getting CVA up and running
Getting CVA up and running
General short-rate analytics
Alexandre Antonov and Michael Spector present an analytical approximation of zero-coupon bonds and swaption prices for general short-rate models. The approximation is based on regular and singular expansions with respect to low volatility and contains a…
Two curves, one price
The financial crisis multiplied the yield curves used to price interest rate derivatives, making traditional no arbitrage pricing no longer valid. By taking into account the basis adjustment bootstrapped from market basis swaps and using a foreign…
Two curves, one price
Interest Rate Derivatives
Two curves, one price
The financial crisis has multiplied the yield curves used to price plain vanilla interest rate derivatives, making classic single-curve no-arbitrage relations and pricing formulas no longer valid. Marco Bianchetti shows that no-arbitrage can be recovered…
Linear, yet attractive, Contour
Banks’ Potential Future Exposure models are at the core of the advanced EAD (Exposure At Default) approach to capital requirements for credit risk considered in the New Basel Capital Accord. Juan Cárdenas, Emmanuel Fruchard and Jean-François Picron look…