Risk Pricing · 10. juin 2024
The Funding Valuation Adjustment (FVA) reflects the funding cost of uncollateralized derivatives above the risk-free rate, typically €STR or OIS in Europe. When a bank hedges an uncollateralized swap with a collateralized market swap, the difference between the internal funding cost and the benchmark rate results in either a negative or positive FVA. This adjustment directly affects the overall cost of hedging transactions.
Mathematical Principles and Quantitative Finance · 07. février 2024
Explore the hypercube's critical role in CDO risk modeling within quantitative finance. A hypercube extends a 2D square or 3D cube into an N-dimensional space, each axis representing a financial asset's cumulative distribution in copula functions. It's pivotal for visualizing complex dependencies in a CDO, where each axis indicates the default probability of different assets.