In this paper we present various methods for fast and accurate calculation of margin valuation adjustments (MVA). We consider the calculation of an MVA using sensitivities for the determination of the initial margin and consider the IDSA SIMM (ISDA Standard Initial Margin Model) as a...

Low-discrepancy (quot;quasi-randomquot;) sampling methods offer the possibility of significantly enhancing the simulation models used in derivative valuation by using non-random quot;randomquot; numbers to generate simulated price paths. The idea is that a set of randomly generated values for...

This paper presents a simple yet powerful new approach for valuing American options by simulation. The key to this approach is to use least squares to estimate the conditional expected payoff to the optionholder from continuation. This makes this approach readily applicable in path-dependent and...

Among numerical methods for valuing derivatives, lattice- based models like the binomial are useful for pricing American options, but have difficulty with path dependent contracts. Monte Carlo simulation is good for path- dependent problems, but has trouble with American early exercise. And for...

We propose a structural model for the valuation of defaultable securities of a firm which models the effect of deliberate misreporting done by insiders in the firm and unobserved by others. We derive exact formulas for equity and bond prices and approximate expressions for the conditional...

We consider counterparty risk for Credit Default Swaps (CDS) in presence of correlation between default of the counterparty and default of the CDS reference credit. Our approach is innovative in that, besides default correlation, which was taken into account in earlier approaches, we also model...

We introduce a new method of optimising the accuracy and time taken to calculate risk for a complex trading book, focusing on the use case of XVA. We dynamically choose the number of paths and time discretisation to target computational effort on calculations that give the most information in...

This paper is an introduction to the measurement of market risk in financial markets, with examples drawn mainly from commodity markets. In particular, we present the concept of VaR, its limits, the problems related to its estimation and backtesting. This is done at single asset and at portfolio...

After Lehman default and the Euro Crisis (crisis which started mid-2007), the industry started to consider the funding risk as a major risk. The practitioners began to charge for their funding cost. In this stressed context, the FVA has been the subject of intense debate, even its definition is...

A method to price American-style option contracts in a limited information framework is introduced. The pricing methodology is based on sequential Monte Carlo techniques, as presented in Doucet, de Freitas, and Gordon's text "Sequential Monte Carlo Methods in Practice", and the least-squares...