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 L�evy Forward Process Model -- 1 Introduction -- 2 The L�evy 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 L�evy Model -- 1 Introduction -- 2 The One-Factor L�evy 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 L�evy 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.

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Electronic reproduction. Ann Arbor, Michigan : ProQuest Ebook Central, 2022. Available via World Wide Web. Access may be limited to ProQuest Ebook Central affiliated libraries.