Technical paper
The simple link from default to LGD
A new approach to incorporating loss given default into models
Classic cutting edge: Swing options and the quest for valuation
Energy Risk presents a classic paper on swing options pricing by Patrick Jaillet, Ehud Ronn and Stathis Tompaidis, which was first published in 1998. It introduced the so-called binomial forest method, which was influential in the development of pricing…
Stochastic modelling of reinsurance credit risk
Stochastic modelling of reinsurance credit risk
Options for collateral options
Options for collateral options
The simple link from default to LGD
The simple link from default to LGD
Cutting Edge introduction: living la vida local
Living la vida local
Local correlation families
Local correlation families
Cutting edge: Modelling dependence of price spikes in Australian electricity markets
The deregulation of Australian electricity markets has brought several challenges, including the possibility of price spikes, which expose market participants to significant risks. As Adebayo Aderounmu and Rodney Wolff outline, these spikes are hard to…
Systematic risk factors redefined
Credit risk factor models tend to have a narrow focus on the Gaussian case, use copula functions that don’t work well with the martingale methods used in pricing, and can introduce arbitrage. Dariusz Gatarek and Juliusz Jablecki show how an increasing…
Cutting Edge introduction: another FVA?
Including funding costs and benefits in derivatives prices is a controversial topic, closely tied up with the credit and debit valuation adjustments of counterparty risk. But new research suggests that, even with no default risk, differences in the…
SABR symmetry
SABR symmetry
Differential rates, differential prices
Differential rates, differential prices