So in principle you would replicate the bond forward by buying and holding the bond, financed by a repo transaction. Similar to an equity forward. Details to worry about include haircuts and reinvestment rates for coupons (if any are paid between now and the forward date). Similar to how one would c...

Thanks for that. I was really hoping for some theoretical results, for example comparing
1. constant move
2. constant % move
3. constant time interval
4. inverse gamma
type rehedge strategies.  

Hi all,

does anybody know some good references for theoretical results on hedging at finite intervals, e.g. at fixed move of the underlying (absolute or relative) or optimally given a fixed number of allowed rehedges? Anything in that vein.

Thanks! 

Just to be clear, arbitrage freeness is not in question here. The OP is referring to the standard formulation of gaussian IRMs, in HJM or shortrate form, they are definitely arb free (with the correct HJM drift as bearish notes, but that is not in question here). On the other hand I am enjoying the ...

I don't know of such a parametrisation. But if you can compute the L-S correlation you are interested in as a function of the MRs and the correlation parameter, then you can presumably hold this quantity fixed (by adjusting rho) as you vary the MRs? 

Excellent, thank you very much! Was hoping it would be a simpler expression but still useful to have a closed form.

Thanks for that. My immediate interest is actually for a=b, so I am probably stuck trying to do the integral (or letting mathematica have a crack). I was hoping somebody may know a reference where this is written down.

Hi all, does somebody know if there is an analytic formula for the expectation of a CEV variable to a power? I.e.   dF = v * F^b where v,b are constants. I am looking for  E[F^a]  for some real constant a. (we know the density of F but I'd rather not try to do the integral if this result is known......

Thanks, very useful!

In case anyone else is interested: after a bit of searching, I found that the breakdown I am talking about is available as part of a banks public "pillar 3 disclosure", which breaks down RWA by risk category. Unfortunately so far I haven't been able to find a report (e.g. by some regulator...

Thanks for that. I have a reasonable grasp of the framework and calculations involved. What I am lacking is a feel for relative size of the different charges. E.g. a breakdown of total capital like 10% market risk, 30% counterparty default risk, 20% CVA risk, 20% operational risk, etc. In other word...

Does anybody have any idea (ideally with a reference) of the relative size of various regulatory capital requirements for a typical large (sifi) bank?
I.e. market risk vs counterparty default risk vs cva risk vs operational risk etc

Thanks

Interesting, thanks. I was hoping they could at least publish derived values (e.g. total portfolio value rather than components), but it sounds like even that is not going to happen.

When regulators (e.g. EBA) do HPEs, they typically just publish the list of instruments and position sizes they want institutions to consider, Does anybody know if they ever publish actual portfolio values (e.g. calculated off some representative/official market data, or as submitted by participatin...

Did part II of this ever get published?
"Optimal Capital Growth Versus Black Swan Insurance Part I: Mediocristan"