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Derivatives’ Risks as Costs in a One-Period Network Model

In: Peter Carr Gedenkschrift Research Advances in Mathematical Finance

Author

Listed:
  • Dorinel Bastide
  • Stéphane Crépey
  • Samuel Drapeau
  • Mekonnen Tadese

Abstract

We present a one-period XVA model encompassing bilateral and centrally cleared trading in a unified framework with explicit formulas for most quantities at hand. We illustrate possible uses of this framework for running stress test exercises on a financial network from a clearing member’s perspective or for optimizing the porting of the portfolio of a defaulted clearing member.

Suggested Citation

  • Dorinel Bastide & Stéphane Crépey & Samuel Drapeau & Mekonnen Tadese, 2023. "Derivatives’ Risks as Costs in a One-Period Network Model," World Scientific Book Chapters, in: Robert A Jarrow & Dilip B Madan (ed.), Peter Carr Gedenkschrift Research Advances in Mathematical Finance, chapter 8, pages 265-310, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789811280306_0008
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    Cited by:

    1. Dorinel Bastide & St'ephane Cr'epey, 2024. "Provisions and Economic Capital for Credit Losses," Papers 2401.07728, arXiv.org, revised Jan 2024.

    More about this item

    Keywords

    Mathematical Finance; Quantitative Finance; Option Pricing; Derivatives; No Arbitrage; Asset Price Bubbles; Asset Pricing; Equilibrium; Volatility; Diffusion Processes; Jump Processes; Stochastic Integration; Trading Strategies; Portfolio Theory; Optimization; Securities; Bonds; Commodities; Futures;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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