Derivatives Risks as Costs in a One-Period Network Model

Authors

Dorinel Bastide, Stéphane Crépey, Samuel Drapeau and Mekonnen Tadese

Date

2022

Journal

Forthcoming in Frontiers of Mathematical Finance

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.

Keywords

Derivative risk, XVA, Network

Download

pdf (open science)