Fast correlation Greeks by adjoint algorithmic differentiation
Adjoint methods have recently been proposed as an efficient way to calculate risk through Monte Carlo simulation. Luca Capriotti and Mike Giles extend these ideas and show how adjoint algorithmic differentiation allows for fast calculation of price sensitivities in full generality. They illustrate the method for the calculation of correlation risk and test it numerically for portfolio default options
One of the consequences of the recent crisis of the financial markets is a renewed emphasis on rigorous risk management practices. To quantify the financial exposure of financial firms, and to ensure efficient capital allocation and more effective hedging practices, regulators and senior management alike are insisting more and more on a thorough monitoring of risk. Among all businesses, those dealing with complex, over-the-counter derivatives are the ones receiving the most attention.
PLEASE
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Risk management
ECB removes need for governing council to approve CCP facility
New “automatic” facility will require safeguards that are “still being implemented”, bank says
Dodging a steamroller: how the basis trade survived the tariff tantrum
Higher margins, rising yields and stable repo funding helped avert another disruptive blow-up
BoE plans to link system-wide and individual stress tests
Meanwhile, ECB wants to broaden system-wide stress models to include central counterparties
Cyber insurance costs expected to rise as loss ratios worsen
Recent ransomware and tech failure events could feed through into higher premiums this year
The WWR in the tail: a Monte Carlo framework for CCR stress testing
A methodology to compute stressed exposures based on a Gaussian copula and mixture distributions is introduced
Repo clearing rule could raise SOFR volatility – OFR analysts
Analysis of 2022 data finds large divergence in tail rates but no change in median
OCC’s security chief on generative AI with guardrails
Clearing house looks to scale technology across risk and data operations – but safety is still the watchword
The Term €STR transition: challenges and market readiness
The progress, challenges and factors shaping the adoption of Term €STR as financial institutions transition from Euribor
