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by PvalAnal85
October 25th, 2012, 3:22 pm
Forum: General Forum
Topic: Counterparty Credit Risk- the only pure form of credit risk?
Replies: 1
Views: 10025

Counterparty Credit Risk- the only pure form of credit risk?

<t>Hello,I'm taxonomically breaking down the different types of risk that a financial institution is exposed to (e.g. Market Risk, Operational Risk, etc.)When it comes to "Credit Risk", I think the true understanding of pure "credit risk" is a bit jumbled up with market risk. When you own a bond (as...
by PvalAnal85
June 21st, 2012, 6:46 pm
Forum: Technical Forum
Topic: Cascade Calibration confusion- LMM
Replies: 1
Views: 12216

Cascade Calibration confusion- LMM

<r>Hello,I'm attempting to build an LMM - forward volatility matrix using a cascade algorithm, my inputs being the quoted ATM Swaption grid (black-lognormal) and an exogenous correlation matrix between the fowards. I'm having trouble with the Alpha and Beta indexes to use in the summation equation t...
by PvalAnal85
May 7th, 2012, 1:20 pm
Forum: Technical Forum
Topic: Regulatory CS01 (Basel CVA charge)
Replies: 8
Views: 32393

Regulatory CS01 (Basel CVA charge)

<t>I'm also reading the BIS article and having trouble with it.Specifically, the fact that they are assuming that the EPE profile is constant. Given that EPEs and CDS spreads are correlated (in order to account for wrong-way-risk) this look like an overly-simplistic model which doesn't take into acc...
by PvalAnal85
April 27th, 2012, 1:58 pm
Forum: General Forum
Topic: Where is all this CVA/DVA coming from?
Replies: 5
Views: 14307

Where is all this CVA/DVA coming from?

Thanks. I'll go and check that out.
by PvalAnal85
April 27th, 2012, 1:50 pm
Forum: General Forum
Topic: Where is all this CVA/DVA coming from?
Replies: 5
Views: 14307

Where is all this CVA/DVA coming from?

<t>In Q1 2012 reports, some large banks (Citi, MS) are reporting DVA-related losses due to tightening credit spreads.But where is all of this DVA coming from? Isn't there an increased focus on collateralization/clearing these days? That should be reducing CVA/DVA to effectively zero. So which busine...
by PvalAnal85
April 23rd, 2012, 3:02 pm
Forum: General Forum
Topic: ois discounting effect on par swaps
Replies: 6
Views: 16115

ois discounting effect on par swaps

<t>HelloI have a further sub-question on this topic, regarding the fact that USD OIS outright swaps do not extend beyond the 10y point, and it is therefore necessary to substitute in FF vs LIBOR basis swaps to extend the OIS and LIBOR curves simultaneously beyond the 10y point.In my view, this shoul...
by PvalAnal85
March 6th, 2012, 3:22 pm
Forum: General Forum
Topic: Credit Default Swap Duration
Replies: 3
Views: 23197

Credit Default Swap Duration

<t>AnFin,"DV01" is a much-abused term in the financial industry (in my opinion). For rates contracts (IRS, Bonds, etc), DV01 describes a sensitivity to interest rates (often calculated by bumping the yield-curve by 1bp and recalculating the NPV, and then taking the difference between original PV).Fo...
by PvalAnal85
February 16th, 2012, 12:56 pm
Forum: Technical Forum
Topic: Market risk factor weightings in Gaussian Copula model
Replies: 4
Views: 14798

Market risk factor weightings in Gaussian Copula model

<r>For some reason i cannot attach the PDF file... here's a web-link to the paper:<URL url="http://www.federalreserve.gov/pubs/feds/2004/200436/200436pap.pdf"><LINK_TEXT text="http://www.federalreserve.gov/pubs/feds ... 436pap.pdf">http://www.federalreserve.gov/pubs/feds/2004/200436/200436pap.pdf</L...
by PvalAnal85
February 16th, 2012, 12:53 pm
Forum: Technical Forum
Topic: Market risk factor weightings in Gaussian Copula model
Replies: 4
Views: 14798

Market risk factor weightings in Gaussian Copula model

<t>Would it help if i attached my spreadsheet so far, so that the step i'm missing is made more explicit?I'm attaching a paper for the model. It's essentially the equation in step (6) that i'm trying to approximate for. If i value p(l, t|M) for the values -2, -1, 0, 1, 2, i want this integral to bec...
by PvalAnal85
February 15th, 2012, 7:26 pm
Forum: Technical Forum
Topic: Market risk factor weightings in Gaussian Copula model
Replies: 4
Views: 14798

Market risk factor weightings in Gaussian Copula model

<t>Hello,I am building an Excel sheet to calculate the PV of a 0-3% CDO tranche, containing 3 credits, using the Gaussian Copula (pre-stochasitc recovery) model.I have already calculated my M-conditional Tranche Expected Loss (TEL), an i'm now looking to integrate over my values of M to get the unco...
by PvalAnal85
January 9th, 2012, 5:14 pm
Forum: General Forum
Topic: Default Probability vs Recovery Rate
Replies: 7
Views: 19686

Default Probability vs Recovery Rate

<r>Not according to the CDS hazard rate model... Check out page 16 of the following link:<URL url="http://www.globalriskguard.com/resources/crderiv/bnp_Understanding%20Credit%20Derivatives%20volume%204.pdfIt"><LINK_TEXT text="http://www.globalriskguard.com/resource ... %204.pdfIt">http://www.globalr...
by PvalAnal85
January 9th, 2012, 4:52 pm
Forum: General Forum
Topic: Default Probability vs Recovery Rate
Replies: 7
Views: 19686

Default Probability vs Recovery Rate

<r>In the Hazard Rate CDS valuation model, for all other variables held constant, the survival curve term structure exhibits overall lower survival probabilities when the recovery rate is higher.This is completely at odds with an "intuitive" understanding of credit markets; that better capitalized f...
by PvalAnal85
December 19th, 2011, 4:42 pm
Forum: Technical Forum
Topic: Heston Model- Closed Form solution
Replies: 6
Views: 19000

Heston Model- Closed Form solution

Is it, perhaps, because the closed-form solution exists for Vanilla options, but such a solution doesn't exist for cliquet/rachet options (i.e. where the model will most likely be implemented)?Thanks
by PvalAnal85
December 19th, 2011, 4:33 pm
Forum: Technical Forum
Topic: Heston Model- Closed Form solution
Replies: 6
Views: 19000

Heston Model- Closed Form solution

<t>Hello,In reading around the Heston model, I noticed that a closed-form solution exists; a complex integral which can be solved using either FFT or basic numerical integration (e.g. Simpson) techniques.My question is- how come this is so often implemented in Monte-Carlo if a closed-form solution e...
by PvalAnal85
December 5th, 2011, 9:24 pm
Forum: General Forum
Topic: CMS Swap
Replies: 50
Views: 214822

CMS Swap

<r>There are some "faster" ways of calculating a CMS swap rate (e.g. using Pelsser/Doust/Hagan convexity adjustment methods through change of measure), but the replication method takes full advantage of the shape of the skew. "analytical" methods can be found in the papers below:Hagan Method: <URL u...
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