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Robust XVA

When: 

Mar 27, 2017 - 1:50pm to 2:55pm

Where: 

Rettaliata Engineering, Room 104

Speaker: 

Stephan Sturm
Department of Mathematical Sciences, Worcester Polytechnic Institute

Description: 

Since the financial crisis of 2008, practitioners in derivative pricing recognized that linear pricing rules are no longer realistic. They started to add pricing adjustments to the clean price, stemming, among other things, from counterparty credit risk, differential interest rates and capital requirements. As summary description for all those adjustments, the term XVA has been established. In this talk, the goal is to address the question of how robust the calculations of XVA are, given the uncertainty of parameter estimation. Specifically, the speaker will consider the example of hedging an exposure of Credit Default Swaps (CDS) with a counterparty prone to default, but where the exact default intensity is unknown. The speaker will provide price bounds as well as associated hedging strategies. This is joint work with Maxim Bichuch and Agostino Capponi.

Event Type: 

Department of Applied Mathematics - Colloquia