Hi everyone,I'm thinking about a macroeconomic stress test model that evaluates impact of macro variables (gdp, real estate, equity, ...) on my credit portfolio.Have my opinion but wanna check? Smart ideas? Papers?Tks in advance

Or maybe it is better for every step computing the forward var?Ciao

I am thinking at the modified duration. Try to map your bonds over the modified duration of the index, maybe you can find a sufficient proxy of the volatility.CiaoFabio

I think you're right. As I understood, you have an asian option and you need a montecarlo with the right model for that.CiaoFabio

<t>It depends on your purpose. If you wanna forwards implied in spot curve, it's better computing zero rates and then forwards. If you wanna use a model, again it depends. For pricing use a risk neutral model (Libor model), for computing var a risk actual mode,l in my opinion, is better (pca, rebona...

<t>Yep sorry Stochastic44 I didn't read carefully. For structured in FX we're implementing a model based on "Consistent pricing and hedging of an FX options book", Mercurio: calibration over the smile with correlated dinamic for the domestic and foreign instantaneous forward rates. Dunno if traders ...

You can find in Wilmott "Derivatives" an example. If you're familiar with R or matlab can help you. I have also a raw function in VBA (I replicate Bloomberg fwd rates). Bybyb

Sent let my know if works. Byby

<t>Hi. It depends on what you need. For a market price you have to calibrate over market data in the risk neutral world. So you can use a model like the libor one to calibrate over the swaptions your instantaneous correlations. For a raw price you can calculate, from historical data, fwd and then co...

Put your email. I have an excel to bootstrap the hazards

Try to implement these papers: -Swaption skews and convexity adjustments, Mercurio-Smiling at convexity: bridging swaption skews and CMS adjustments, MercurioYou can find in fabiomercurio.it

If you need I have an implementation of the base correlation model to price standard CDO's (ITRAXX and CDX).

Anyone can share prices and vol on inflation options in EUR and USD?

<t>I dealt with this convexity bond:w*fix_rate+(1-w)*floatingwhere w is function of inflation. I solved isolating a term likefloating(t)*CPI(t)/CPI(0)=fwdEUR*fwdCPI*exp(volEUR*volCPI*correlationEURCPI)that is a quanto adjustment. You can calibrate volCPI and correlation let's say using for guide Mer...

I am dealing with the same problem. There are 2 papers (Pricing Inflation-Indexed Derivatives and Pricing Inflation-Indexed Options with Stochastic Volatility) very useful with an example of calibration. The author is F. Mercurio and you can find both in his website.