'Risk neutral measure' presentation slideshows

AN INFORMATION-BASED APPROACH TO CREDIT-RISK MODELLING

490 views • 32 slides

Gaussian Approximations for Option Prices in Stochastic Volatility Models

Gaussian Approximations for Option Prices in Stochastic Volatility Models. Chuanshu Ji (joint work with Ai-ru Cheng, Ron Gallant, Beom Lee) UNC-Chapel Hill. Outline. Calibration of SV models using both return and option data

385 views • 28 slides

CVA and FVA Overview

Credit value adjustment (CVA) is the market price of counterparty credit risk that has become a central part of counterparty credit risk management. By definition, CVA is the difference between the risk-free portfolio value and the true/risky portfolio value. In practice, CVA should be computed at portfolio level. That means calculation should take Master agreement and CSA agreement into account. Funding Valuation Adjustment (FVA) is introduced to capture the incremental costs of funding uncollateralized derivatives. It can be referred to as the difference between the rate paid for the collateral to the bank’s treasury and rate paid by the clearinghouse. Also FVA can be thought of as a hedging cost or benefit arising from the mismatch between an uncollateralized client trade and a collateralized hedge in the interdealer market. FVA should be also calculated at portfolio level. This presentation elaborates an integrated framework for calculating both CVA and FVA. We also discuss the pros and cons of comparing the popular credit exposure approach and the more accurate least square Monte Carlo approach. You can find more details at http://www.finpricing.com/lib/cvaFva.html

196 views • 18 slides

Financial Market 123

A financial market is a market where people trade financial products. Typical financial markets are the fixed income and interest rate market, the currency market, the equity market, the commodity market and the credit market. One of the central tenets of financial economics is the necessity of some trade off between risk and expected return. This presentation gives an overview of financial market basics. You find more information at http://www.finpricing.com/lib/market.html

199 views • 15 slides