Technical paper

A structural approach to EDS pricing

Structural credit models have been used to price bothcredit and equity derivatives, making them a naturalframework to price equity default swaps. Using such aframework, Elena Medova and Robert Smith derivean analytic expression for the EDS spread,…

Wrong way risk modelling

Beyond its potential impact on counterparty risk exposure, the wrong way risk arising in some derivatives transactions raises important modelling challenges. Christian Redon presents two suitable models based on conditional expected exposure. Among…

Hedging weather exposure

Volumetric weather risk is usually levered by the commodity price, resulting in cross-commodity exposure known as a quanto. Hedging such exposure with quanto instruments is costly. Victor Dvortsov suggests a simple strategy that allows efficient hedging…

At the flick of a switch

Jesper Andreasen and Martin Dahlgren present a regime-switching model for electricity derivatives that incorporates spiky spot-price dynamics and allows for closed-form pricing of forwards, options and swaptions

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