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Innovations in Derivatives Markets

Fixed Income Modeling, Valuation Adjustments, Risk Management, and Regulation

  • Conference proceedings
  • Open Access
  • © 2016

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Overview

  • Explores recent developments in derivative pricing, fixed-income and interest rate modeling
  • Casts new light on counterparty and liquidity risk in a global derivatives market with a special focus on valuation adjustments
  • Features authoritative contributions by leading experts from both academia and practice
  • Includes supplementary material: sn.pub/extras

Part of the book series: Springer Proceedings in Mathematics & Statistics (PROMS, volume 165)

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About this book

This book presents 20 peer-reviewed chapters on current aspects of derivatives markets and derivative pricing. The contributions, written by leading researchers in the field as well as experienced authors from the financial industry, present the state of the art in:

• Modeling counterparty credit risk: credit valuation adjustment, debit valuation adjustment, funding valuation adjustment, and wrong way risk.

• Pricing and hedging in fixed-income markets and multi-curve interest-rate modeling.

• Recent developments concerning contingent convertible bonds, the measuring of basis spreads, and the modeling of implied correlations.

The recent financial crisis has cast tremendous doubts on the classical view on derivative pricing. Now, counterparty credit risk and liquidity issues are integral aspects of a prudent valuation procedure and the reference interest rates are represented by a multitude of curves according to their different periods and maturities.

A panel discussion included in the book (featuring Damiano Brigo, Christian Fries, John Hull, and Daniel Sommer) on the foundations of modeling and pricing in the presence of counterparty credit risk provides intriguing insights on the debate.

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Keywords

Table of contents (21 papers)

  1. Valuation Adjustments

  2. Fixed Income Modeling

  3. Financial Engineering

Editors and Affiliations

  • Lehrstuhl für Finanzmathematik, Technische Universität München, Garching-Hochbrück, Germany

    Kathrin Glau, Matthias Scherer, Rudi Zagst

  • LPMA, Université Paris–Diderot (Paris 7), Paris Cedex 13, France

    Zorana Grbac

About the editors

Kathrin Glau is a Junior Professor of Mathematical Finance at the Technical University of Munich. Her research focuses on the complex demands on numerical tools and modeling in today’s market. Her approach merges recent advances from numerical analysis and financial modeling in order to develop pricing methods in advanced models with the help of thorough error analysis are developed. Her speciality is Galerkin methods for partial integro-differential equations for (pure) jump Levy driven models.

Zorana Grbac is an Assistant Professor of Mathematical Finance at the Laboratoire de Probabilités et Modèles Aléatoires, University Paris Diderot. Her research interests include applications of Lévy processes and other stochastic processes with jumps in mathematical finance, with an emphasis on modeling of the term structure of interest rates and credit risk modeling. She also works on asymptotic methods for pricing of interest rate derivatives. She haspublished several research papers on multi-curve modeling, pricing and valuation adjustments and is co-author of the book "Interest Rate Modeling: Post-Crisis Challenges and Approaches".

Matthias Scherer is a Professor of Mathematical Finance at the Technical University of Munich. His research interests comprise various topics in Financial Mathematics, Actuarial Science, and Probability Theory. Concerning risk management, he has published research articles on portfolio-credit risk, dependence modeling, and model risk. He is an active member of the managerial boards of the DGVFM and the KPMG Center of Excellence in Risk Management. He is co-author of the book "Simulating Copulas: Stochastic Models, Sampling Algorithms, and Applications".

Rudi Zagst is a Professor of Mathematical Finance, Director of the Center of Mathematics and member of the managerial board of the KPMG Center of Excellence in Risk Management at the Technical Universityof Munich. He also serves as a professional trainer for a number of leading institutions. His current research interests are in financial engineering, risk and asset management.

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