IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03910144.html
   My bibliography  Save this paper

Derivatives Risks as Costs in a One-Period Network Model

Author

Listed:
  • Dorinel Bastide
  • Stéphane Crépey

    (UFR Mathématiques UPCité - UFR Mathématiques [Sciences] - Université Paris Cité - UPCité - Université Paris Cité)

  • 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, 2022. "Derivatives Risks as Costs in a One-Period Network Model," Post-Print hal-03910144, HAL.
    • Handle: RePEc:hal:journl:hal-03910144
    Note: View the original document on HAL open archive server: https://hal.science/hal-03910144
    as

    Download full text from publisher

    File URL: https://hal.science/hal-03910144/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. M. Kaina & L. Rüschendorf, 2009. "On convex risk measures on L p -spaces," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 69(3), pages 475-495, July.
    2. Acerbi, Carlo & Tasche, Dirk, 2002. "On the coherence of expected shortfall," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1487-1503, July.
    3. Umar Faruqui & Wenqian Huang & Előd Takáts, 2018. "Clearing risks in OTC derivatives markets: the CCP-bank nexus," BIS Quarterly Review, Bank for International Settlements, December.
    4. Dr. Robert Oleschak, 2019. "Central Counterparty Auctions and Loss Allocation," Working Papers 2019-06, Swiss National Bank.
    5. Claudio Albanese & Stéphane Crépey & Rodney Hoskinson & Bouazza Saadeddine, 2021. "XVA analysis from the balance sheet," Quantitative Finance, Taylor & Francis Journals, vol. 21(1), pages 99-123, January.
    6. Lokman Abbas-Turki & St'ephane Cr'epey & Bouazza Saadeddine, 2022. "Pathwise CVA Regressions With Oversimulated Defaults," Papers 2211.17005, arXiv.org.
    7. Murphy, David & Nahai-Williamson, Paul, 2014. "Financial Stability Paper 30: Dear Prudence, won’t you come out to play? Approaches to the analysis of CCP default fund adequacy," Bank of England Financial Stability Papers 30, Bank of England.
    8. Alexander J. McNeil & Rüdiger Frey & Paul Embrechts, 2015. "Quantitative Risk Management: Concepts, Techniques and Tools Revised edition," Economics Books, Princeton University Press, edition 2, number 10496.
    9. Hamed Amini & Damir Filipović & Andreea Minca, 2020. "Systemic Risk in Networks with a Central Node," Swiss Finance Institute Research Paper Series 20-04, Swiss Finance Institute.
    10. Bora Durdu & Rochelle M. Edge & Daniel Schwindt, 2017. "Measuring the Severity of Stress-Test Scenarios," FEDS Notes 2017-05-05, Board of Governors of the Federal Reserve System (U.S.).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dorinel Bastide & Stéphane Crépey & Samuel Drapeau & Mekonnen Tadese, 2022. "Derivatives Risks as Costs in a One-Period Network Model," Working Papers hal-03554577, HAL.
    2. Dorinel Bastide & St'ephane Cr'epey & Samuel Drapeau & Mekonnen Tadese, 2022. "Derivatives Risks as Costs in a One-Period Network Model," Papers 2202.03248, arXiv.org, revised Feb 2022.
    3. Daniel Velásquez-Gaviria & Andrés Mora-Valencia & Javier Perote, 2020. "A Comparison of the Risk Quantification in Traditional and Renewable Energy Markets," Energies, MDPI, vol. 13(11), pages 1-42, June.
    4. Furman, Edward & Wang, Ruodu & Zitikis, Ričardas, 2017. "Gini-type measures of risk and variability: Gini shortfall, capital allocations, and heavy-tailed risks," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 70-84.
    5. Annika Homburg & Christian H. Weiß & Gabriel Frahm & Layth C. Alwan & Rainer Göb, 2021. "Analysis and Forecasting of Risk in Count Processes," JRFM, MDPI, vol. 14(4), pages 1-25, April.
    6. Marie Kratz & Yen H Lok & Alexander J Mcneil, 2016. "Multinomial var backtests: A simple implicit approach to backtesting expected shortfall," Working Papers hal-01424279, HAL.
    7. Gabriele Canna & Francesca Centrone & Emanuela Rosazza Gianin, 2021. "Capital Allocation Rules and the No-Undercut Property," Mathematics, MDPI, vol. 9(2), pages 1-13, January.
    8. Panagiotis Xidonas & Christos E. Kountzakis & Christis Hassapis & Christos Staikouras, 2016. "RAROC in portfolio optimization," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-14, September.
    9. John Armstrong & Damiano Brigo, 2017. "Optimizing S-shaped utility and implications for risk management," Papers 1711.00443, arXiv.org, revised Jan 2018.
    10. Ruodu Wang & Ričardas Zitikis, 2021. "An Axiomatic Foundation for the Expected Shortfall," Management Science, INFORMS, vol. 67(3), pages 1413-1429, March.
    11. Tadese, Mekonnen & Drapeau, Samuel, 2020. "Relative bound and asymptotic comparison of expectile with respect to expected shortfall," Insurance: Mathematics and Economics, Elsevier, vol. 93(C), pages 387-399.
    12. Allaj, Erindi & Sanfelici, Simona, 2023. "Early Warning Systems for identifying financial instability," International Journal of Forecasting, Elsevier, vol. 39(4), pages 1777-1803.
    13. Hasanjan Sayit, 2022. "A discussion of stochastic dominance and mean-risk optimal portfolio problems based on mean-variance-mixture models," Papers 2202.02488, arXiv.org, revised Jul 2023.
    14. Fantazzini, Dean & Shangina, Tamara, 2019. "The importance of being informed: forecasting market risk measures for the Russian RTS index future using online data and implied volatility over two decades," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 55, pages 5-31.
    15. Davide Lauria & W. Brent Lindquist & Svetlozar T. Rachev, 2023. "Enhancing CVaR portfolio optimisation performance with GAM factor models," Papers 2401.00188, arXiv.org.
    16. Yiting Fan & Rui Fang, 2022. "Some Results on Measures of Interaction among Risks," Mathematics, MDPI, vol. 10(19), pages 1-19, October.
    17. Armstrong, John & Brigo, Damiano, 2019. "Risk managing tail-risk seekers: VaR and expected shortfall vs S-shaped utility," Journal of Banking & Finance, Elsevier, vol. 101(C), pages 122-135.
    18. Marcelo Brutti Righi & Fernanda Maria Muller & Marlon Ruoso Moresco, 2017. "On a robust risk measurement approach for capital determination errors minimization," Papers 1707.09829, arXiv.org, revised Oct 2020.
    19. James, Robert & Leung, Henry & Leung, Jessica Wai Yin & Prokhorov, Artem, 2023. "Forecasting tail risk measures for financial time series: An extreme value approach with covariates," Journal of Empirical Finance, Elsevier, vol. 71(C), pages 29-50.
    20. Wenqian Huang & Haoxiang Zhu, 2021. "CCP Auction Design," BIS Working Papers 938, Bank for International Settlements.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03910144. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.