Quants call for Isda to clarify close-out values
Leading quants highlight ambiguity in Isda master agreement - but warn that resolving the issue could worsen systemic risk
The International Swaps and Derivatives Association needs to provide clarity on whether counterparty risk adjustments should be included when settling derivatives contracts upon termination, quants say – but they warn that either of the obvious answers could exacerbate systemic risk in a crisis.
In a technical paper published this month by Risk, Damiano Brigo, professor of finance at King's College London, and Massimo Morini, head of credit models and co-ordinator of quantitative research at
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