Showing 1 - 10 of 19
We generalize the algorithmic differentiation method proposed by Antonov (2016) from price Greeks to XVA Greeks. This method, named Backward Differentiation (BD), was developed in the context of computing price or PV Greeks for individual callable exotic trades.We start by treating cases where...
Persistent link: https://www.econbiz.de/10012967129
In this article, we study the algorithmic calculation of present values greeks for callable exotic instruments. The speed of greeks evaluations becomes important with recent initial margin rules, including the ISDA standard model SIMM, requiring sensitivity calculations for non-cleared deals...
Persistent link: https://www.econbiz.de/10012968139
Computing Standardized Initial Margin Model Margin Valuation Adjustment (SIMM-MVA) requires the simulation of future sensitivities, but these are expensive to compute for callable products. This paper introduces a method which avoids nested calls to the pricing function, similar to the use of...
Persistent link: https://www.econbiz.de/10012947422
In the current low-interest-rate environment, extending option models to negative rates has become an important issue. This paper describes one such extension of the widely used SABR model. We stress that our solution is more natural and attractive than the shifted SABR.An exact formula is...
Persistent link: https://www.econbiz.de/10013029226
Servicing clients can require posting Initial Margin (IM) for client trades, and for their hedges. IM should be forecast for both and reflected in MVA. For non-vanillas with dynamic hedges, forecasting hedge-trade IM is challenging as future hedge ratios are necessary, and future sensitivities...
Persistent link: https://www.econbiz.de/10012911423
In this article, we present the 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 the small volatility and contains a low-dimensional integration. The model in hand...
Persistent link: https://www.econbiz.de/10013136997
In this article we present an efficient optimization for calculating the exposure and CVA for large portfolios of vanilla swaps. It is based on a "thin-out" procedure applied to fixed payment streams, which reduces a very frequent stream of payments to a much less frequent one. The procedure...
Persistent link: https://www.econbiz.de/10013099510
In this paper, we present advanced analytical formulas for SABR model option pricing. The first technical result consists of a new exact formula for the zero correlation case. This closed form is a simple 2D integration of elementary functions, particularly attractive for numerical...
Persistent link: https://www.econbiz.de/10013108810
A model/hedging performance is relatively poorly covered in the literature. This is particularly valid for general portfolios including both vanilla and exotic instruments. Practitioners generally use so called \pnl explain which measures whether portfolio price movements can be explained by...
Persistent link: https://www.econbiz.de/10012896903
Stochastic volatility models are widely used in interest rate modeling to match the option smiles -- the two most popular are the Heston model and the SABR one. These have been incorporated into arbitrage-free term structure frameworks, Heston-LMM and SABR-LMM respectively.In this paper we...
Persistent link: https://www.econbiz.de/10013059957