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Linear, Yet Attractive, Contour

In: Quantitative Analysis In Financial Markets Collected Papers of the New York University Mathematical Finance Seminar(Volume III)

Author

Listed:
  • JUAN D. CÁRDENAS

    (Federal Reserve Bank of New York, 33 Maiden Lane, 24th floor, New York, NY 10038, USA)

  • EMMANUEL FRUCHARD

    (Quotient, 62 rue Beaubourg, 75003 Paris, France)

  • JEAN-FRANÇOIS PICRON

    (Goldman Sachs & Co., USA)

Abstract

To measure pre-settlement risk, a component of Credit Risk, we describe a method to quickly and accurately estimate Potential Future Exposure. Based on the properties of portfolios with single counterparties, this method determines exposures at desired confidence levels throughout a portfolio's life. Results are within 5% of a full Monte Carlo simulation estimate, but 100 times faster, while still based on full valuation, supporting an unlimited number of risk factors, and netting.

Suggested Citation

  • Juan D. Cárdenas & Emmanuel Fruchard & Jean-François Picron, 2002. "Linear, Yet Attractive, Contour," World Scientific Book Chapters, in: Marco Avellaneda (ed.), Quantitative Analysis In Financial Markets Collected Papers of the New York University Mathematical Finance Seminar(Volume III), chapter 15, pages 329-335, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789812778451_0015
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    Keywords

    Quantitative Analysis; Financial Markets;

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