4 papers · 1 filter
Liability-side Pricing of Swaps and Coherent CVA and FVA by Regression/Simulation
Wujiang Lou
An uncollateralized swap hedged back-to-back by a CCP swap is used to introduce FVA. The open IR01 of FVA, however, is a sure sign of risk not being fully hedged, a theoretical no-…
MVA Transfer Pricing
Wujiang Lou
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation a…
Coherent CVA and FVA with Liability Side Pricing of Derivatives
Wujiang Lou
This article presents FVA and CVA of a bilateral derivative in a coherent manner, based on recent developments in fair value accounting and ISDA standards. We argue that a derivati…
Extending the Black-Scholes Option Pricing Theory to Account for an Option Market Maker's Funding Costs
Wujiang Lou
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securitie…