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"Category: Financial Engineering"
Currently, the mandated formula for the calculation for CVA, for regulatory purposes, is as follows
Which equates to
Where 
is the probability of default between time 
and 
. For further read more
What is the impact or what is the potential difference between the regulatory method and whatever model an institution may use to calculate their CVA VaR (as well as their read more
The upshot of our post on Wrong-Way Risk, is that it is entirely possible to need multiple views of CVA. The challenge is now that CVA, an already onerous read more
DVA is the controversial twin of CVA. The acceptence of DVA as a mark-to-market item on derivatives positions should be no more controversial than the acceptance of CVA. If one read more
Many options model papers propose an option model, derive a solution, or deal with the framework the model provides in which to price an option, and finally, detail how to read more
With the liquidity coverage ratio looking to be implemented largely unchanged come 2015, the SARB approved this week a R240 billion rand emergency support facility, which will come into read more
Speaking at the Risk Annual Summit, Damiano Brigo warned of the potential introduction of systemic risk by institutions hedging their DVA risk.
“If you think about this strategy in 2008, read more
Or rather, Matt Levine on the Fed on Basel III. An interesting discussion around the rules regarding the mark-to-market of available for sale securities, and the potential (dis)incentives around read more
Revisiting our post on calibration, there’s a fairly stupid example, that at least illustrates the opportunity cost of letting other people analyse your data for you (and callibrating to read more