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Title: Valuation of contracts with counterparty and funding risk under netting and collateral agreements
Author: Durand, Cyril
ISNI:       0000 0004 9350 5269
Awarding Body: Imperial College London
Current Institution: Imperial College London
Date of Award: 2018
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In this Thesis we try to contribute to the debate on how to evaluate and manage counterparty credit and funding risks. • Chapter 1 examines the issue of taking into account alternative settlement conventions as well as systemic risk in the assessment of Credit Valuation Adjustment. It is essentially a very close version of the article co-wrote with Professor Marek Rutkowski (Sydney University) on the subject, which was published in the International Journal of Theoretical and Applied Finance (IJTAF) in November 2013. • Chapter 2 aims at studying funding costs from an actuarial perspective, i.e. when funding risks cannot be totally hedged. A related article was co-wrote with Professor Damiano Brigo and can be found on line at (see [17]). • Chapter 3 examines a problem commonly faced by practitioners when resorting to log-normal instantaneous interest rate models, namely the risk that they take unrealistically high values, which renders difficult their application to CVA and FVA management. Again, the content of this Chapter can be found under a slightly different set-up as a stand alone article at • Chapter 4 details a Heston 2 Factors affine HJM model in the context of CVA and FVA manage- ment, especially volatility wrong way risk, of equity/interest rate hybrid instruments as well as equity instruments with long maturity. • Chapter 5 brings together some considerations on recent ’hot subjects’ from a counterparty valua- tion risk and regulatory point of view, more specifically how to compute collateral cost in a unified setting with CVA and FVA, as well as the challenges imposed by the Non Modellable Risk Factors guidelines on the CVA Fundamental Review of the Trading Book (CVA-FRTB) risk measures as well as XVA valuations such as LVA and KVA.
Supervisor: Brigo, Damiano Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral