We present a dynamic model of a Central Counterparty (CCP) and use it to quantify the associated credit risks. First, we apply the model to obtain a closed-form approximation to the Credit Valuation Adjustment (CVA) arising due to membership of a CCP; then, we apply the model to economic capital...

We consider the problem of quantifying credit and funding risks in the presence of initial margin calculated by dynamically updated risk measures, such as Value-at-Risk and Expected Shortfall. The analytic scaling approach proposed in Andersen et al. [2] is generalized from a system driven by...

In this paper, we propose two practicable approaches for consistently modelling the realworld and risk-neutral measures within cross-asset Monte-Carlo frameworks. We go on to explore the necessity of supporting the real-world measure and consider its calibration with the aid of an explicit...

In this paper, we consider the numerical approximation of the prices of vanilla options in a displaced-lognormal Heston model. First of all, we derive an alternative representation of option prices which facilitates robust numerical approximation including the case where the local volatility is...