Margin Period of Risk in Credit Valuation Adjustment Calculations

Master thesis (2019)

Authors

M.E. Kirana Electrical Engineering, Mathematics and Computer Science

Contributors

C.W. Oosterlee Numerical Analysis - EEMCS (mentor)
Raoul Pietersz (graduation committee member)
N. Parolya Statistics - EEMCS (coach)
Faculty
Electrical Engineering, Mathematics and Computer Science, Electrical Engineering, Mathematics and Computer Science
Copyright: © 2019 Marco Kirana
More Info
expand_more

Published Date

01-10-2019

Language

English

Reuse Rights

Other than for strictly personal use, it is not permitted to download, forward or distribute the text or part of it, without the consent of the author(s) and/or copyright holder(s), unless the work is under an open content license such as Creative Commons.

Faculty

Electrical Engineering, Mathematics and Computer Science

Abstract

The aim of this thesis is to model fully collateralized exposures in the presence of the Margin Period of Risk, i.e., the time between the last successful collateral call to the time where the amount of the loss crystallizes. We start with introducing a closed-form expression to model fully collateralized exposures for fixed versus floating interest rate swaps. Then the Brownian bridge method is introduced and applied, which allows for improvements computational wise. Finally, fully collateralized exposures are modeled in the presence of the Margin Period of Risk, with the Least Squares Monte Carlo method in the case of one European call option under Black-Scholes assumptions.