Table of Contents: Innovations in Derivatives Markets :

Innovations in Derivatives Markets : Fixed Income Modeling, Valuation Adjustments, Risk Management, and Regulation.

Bibliographic Details
Main Author:	Glau, Kathrin.
Other Authors:	Grbac, Zorana., Scherer, Matthias., Zagst, Rudi.
Format:	eBook
Language:	English
Published:	Cham : Springer International Publishing AG, 2016.
Edition:	1st ed.
Series:	Springer Proceedings in Mathematics and Statistics Series
Subjects:	Electronic books.
Online Access:	Click to View

Table of Contents:

Intro
Preface
Foreword
Contents
Part I Valuation Adjustments
Nonlinearity Valuation Adjustment
1 Introduction
2 Trading Under Collateralization, Close-Out Netting, and Funding Risk
2.1 Collateralization
2.2 Close-Out Netting
2.3 Funding Risk
3 Generalized Derivatives Valuation
3.1 Discrete-Time Solution
3.2 Continuous-Time Solution
4 Nonlinear Valuation: A Numerical Analysis
4.1 Monte Carlo Pricing
4.2 Case Outline
4.3 Preliminary Valuation Under Symmetric Funding and Without Credit Risk
4.4 Complete Valuation Under Credit Risk, Collateral, and Asymmetric Funding
4.5 Nonlinearity Valuation Adjustment
5 Conclusions and Financial Implications
References
Analysis of Nonlinear Valuation Equations Under Credit and Funding Effects
1 Introduction
2 Cash Flows Analysis and First Valuation Equation
2.1 The Cash Flows
2.2 Adjusted Cash Flows Under a Simple Trading Model
3 An FBSDE Under mathcalF
4 Markovian FBSDE and PDE for widetildeVt and the Invariance Theorem
References
Nonlinear Monte Carlo Schemes for Counterparty Risk on Credit Derivatives
1 Introduction
2 Prices
2.1 Setup
2.2 Clean Price
2.3 All-Inclusive Price
3 TVA BSDEs
3.1 Full TVA BSDE
3.2 Partially Reduced TVA BSDE
3.3 Fully Reduced TVA BSDE
3.4 Marked Default Time Setup
4 TVA Numerical Schemes
4.1 Linear Approximation
4.2 Linear Expansion and Interacting Particle Implementation
4.3 Marked Branching Diffusion Approach
5 TVA Models for Credit Derivatives
5.1 Dynamic Gaussian Copula TVA Model
5.2 Dynamic Marshall
Olkin Copula TVA Model
5.3 Strong Versus Weak Dynamic Copula Model
6 Numerics
6.1 Numerical Results in the DGC Model
6.2 Numerical Results in the DMO Model
7 Conclusion
References.
Tight Semi-model-free Bounds on (Bilateral) CVA
1 Introduction
2 Counterparty Default Risk
3 The Main Building Blocks of CVA
4 Models for Counterparty Risk
4.1 Independence of CVA Components
4.2 Modeling Options on the Basis Transaction
4.3 Hybrid Models
-An Example
5 Tight Bounds on CVA
5.1 Tight Bounds on CVA by Mass Transportation
5.2 An Alternative Formulation as Assignment Problem
6 Example
6.1 Setup
6.2 Results
6.3 Computation Time, Choice of Algorithm, and Impact of Assumptions
7 Conclusion and Outlook
References
CVA with Wrong-Way Risk in the Presence of Early Exercise
1 Introduction
2 CVA Pricing and WWR
3 The Impact of Early Exercise
3.1 The Pricing Problem
3.2 The Plain Vanilla Case
4 The Bermudan Swaption Case
5 Concluding Remarks
References
Simultaneous Hedging of Regulatory and Accounting CVA
1 Introduction
2 Counterparty Risk from a Regulatory Perspective: The Standardized CVA Risk Charge
2.1 Standardized CVA Risk Charge as Volatility
3 Counterparty Risk from an Accounting Perspective
3.1 CVA Hedging from an Accounting Perspective
4 Portfolio P&amp
L
4.1 Portfolio P&amp
L Without CVA
4.2 Impact with CVA
4.3 Impact of CVA Risk Charge Hedging on the Accounting P&amp
L Volatility
5 Determination of the Optimal Hedge Strategy
5.1 Special Cases
References
Capital Optimization Through an Innovative CVA Hedge
1 Preface
2 The Role of Collateral in OTC Contracts and Its Legal Basis
2.1 The Role of Legal Versus Economic Ownership
2.2 Affected Market Participants
2.3 Financial Instruments Involving Collateral and Standard Legal Frameworks (Master Agreements)
2.4 Credit and Counterparty Risk Related to Collateral
3 Terms of Liquidity and Definition of Liquidity Transformation.
3.1 Terms of Liquidity
3.2 Comparison of Secured and Unsecured Financing
3.3 Liquidity Transformation
4 New Approach to CVA Hedging
4.1 Issue
4.2 Solution
4.3 Application
4.4 Example
5 Conclusion
References
FVA and Electricity Bill Valuation Adjustment
-Much of a Difference?
1 Welcome
2 Damiano Brigo
3 Christian Fries
4 John Hull
5 Daniel Sommer
5.1 Acknowledgements, Credits, and Disclaimer
References
Part II Fixed Income Modeling
Multi-curve Modelling Using Trees
1 Introduction
2 The LIBOR-OIS Spread
3 The Methodology
4 A Simple Three-Step Example
5 Valuation of a Spread Option
6 Bermudan Swap Option
7 Conclusions
References
Derivative Pricing for a Multi-curve Extension of the Gaussian, Exponentially Quadratic Short Rate Model
1 Introduction
2 Preliminaries
2.1 Discount Curve and Collateralization
2.2 Martingale Measures
3 Short Rate Model
3.1 The Model
3.2 Bond Prices (OIS and Libor Bonds)
3.3 Forward Measure
4 Pricing of Linear Interest Rate Derivatives
4.1 FRAs
4.2 Interest Rate Swaps
5 Nonlinear/optional Interest Rate Derivatives
5.1 Caps and Floors
5.2 Swaptions
References
Multi-curve Construction
1 Introduction
2 Foundations, Assumptions, Notation
3 Discount Curves
4 Forward Curves
4.1 Performance Index of a Discount Curve (or ``Self-Discounting'')
5 Interpolation of Curves
5.1 Implementing the Interpolation of a Curve: Interpolation Method and Interpolation Entities
5.2 Interpolation Time
5.3 Interpolation of Forward Curves
5.4 Assessment of the Interpolation Method
6 Implementation of the Calibration of Curves
6.1 Generalized Definition of a Swap
6.2 Calibration of Discount Curve to Swap Paying the Collateral Rate (aka. Self-Discounted Swaps).
6.3 Calibration of Forward Curves
6.4 Calibration of Discount Curves When Payment and Collateral Currency Differ
6.5 Lack of Calibration Instruments (for Difference in Collateralization)
6.6 Implementation
7 Redefining Forward Rate Market Models
8 Some Numerical Results
8.1 Impact of the Interpolation Entity of a Forward Curve on the Delta Hedge
8.2 Impact of the Lack of Calibration Instruments for the Case of a Foreign Swap Collateralized in Domestic Currency
8.3 Impact of the Interpolation Scheme on the Hedge Efficiency
9 Conclusion
References
Impact of Multiple-Curve Dynamics in Credit Valuation Adjustments
1 Introduction
2 Valuation Equation with Credit and Collateral
2.1 Valuation Framework
2.2 The Master Equation Under Change of Filtration
3 Valuing Collateralized Interest-Rate Derivatives
3.1 Overnight Rates and OIS
3.2 LIBOR Rates, IRS and Basis Swaps
3.3 Modeling Constraints
4 Interest-Rate Modeling
4.1 Multiple-Curve Collateralized HJM Framework
4.2 Numerical Results
References
A Generalized Intensity-Based Framework for Single-Name Credit Risk
1 Introduction
2 A General Account on Credit Risky Bond Markets
2.1 The Generalized Intensity-Based Framework
2.2 An Extension of the HJM Approach
3 Affine Models in the Generalized Intensity-Based Framework
4 Conclusion
References
Option Pricing and Sensitivity Analysis in the Lévy Forward Process Model
1 Introduction
2 The Lévy Forward Process Model
3 Fourier-Based Methods for Option Pricing
4 Sensitivity Analysis
4.1 Greeks Computed by the Malliavin Approach
4.2 Greeks Computed by the Fourier-Based Valuation Method
4.3 Examples
References
Inside the EMs Risky Spreads and CDS-Sovereign Bonds Basis
1 Introduction
2 Local Currency Bonds No-Arbitrage HJM Setting.
2.1 Risky Bonds Under Marked Point Process
2.2 Model Formulation
3 CDS-Bond Basis
3.1 General Notes
3.2 Technical Notes
3.3 CDS-Bond Basis Empirics
4 Conclusion
References
Part III Financial Engineering
Basket Option Pricing and Implied Correlation in a One-Factor Lévy Model
1 Introduction
2 The One-Factor Lévy Model
2.1 The Model
2.2 The Risk-Neutral Stock Price Processes
3 A Three-Moments-Matching Approximation
3.1 Matching the First Three Moments
3.2 Approximate Basket Option Pricing
3.3 The FFT Method and Basket Option Pricing
4 Examples and Numerical Illustrations
4.1 Variance Gamma
4.2 Pricing Basket Options
5 Implied Lévy Correlation
5.1 Variance Gamma
5.2 Double Exponential
6 Conclusion
References
Pricing Shared-Loss Hedge Fund Fee Structures
1 Introduction
2 Hedge Fund Fees
3 The First-Loss Model
4 An Option Pricing Framework
4.1 Payoff to the Investor
4.2 Payoff to the Manager
4.3 Valuation: Pricing Fees as Derivatives
5 Consequences of the Derivative Pricing Framework
5.1 Graphical Analysis
5.2 Sensitivity Analysis
6 Conclusion
References
Negative Basis Measurement: Finding the Holy Scale
1 Introduction
2 Why Does Negative Basis Exist?
3 General Notations
4 Traditional Measurements
4.1 The Z-Spread Methodology
4.2 The Par-Equivalent CDS Methodology
5 An Innovative Methodology
6 Conclusion
References
The Impact of a New CoCo Issuance on the Price Performance of Outstanding CoCos
1 Introduction
2 The Equity Derivatives Model
3 Measuring the Price Performance of the Outstanding CoCos
3.1 New Issuances
3.2 CoCo Index Comparison
3.3 Model-Based Performance
4 Impact After Issue Date
5 Conclusion
References
The Impact of Cointegration on Commodity Spread Options.
1 Introduction.

Innovations in Derivatives Markets : Fixed Income Modeling, Valuation Adjustments, Risk Management, and Regulation.

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