Risk Magazine Cutting Edge Research Article | Funding Valuation Adjustment for General Instruments
In this Cutting Edge research article published in the November 2015 Issue of Risk Magazine, Drs Alexandre Antonov, Marco Bianchetti and Ion Mihai develop a universal and efficient approach to numerical FVA calculation for portfolios of general instruments with multiple stochastic assets and funding sources.
The authors presented a generalized pricing framework, where the replication portfolio is split between general, non-linear functions of the portfolio value, funded with different rates, based on Antonov, Bianchetti & Mihai (2013).
In this paper, they also proposed an implementation framework for the calculation of the FVA, which provides a practical and very accurate approximation for portfolios containing both vanilla and exotic instruments. Finally, they presented the numerical results for the FVA of a partially collateralized Bermudan swaption, showcasing the high accuracy of the approximation.
Authors: Alexandre Antonov, Marco Bianchetti, Ion Mihai
In this Cutting Edge research article published in the November 2015 Issue of Risk Magazine, Drs Alexandre Antonov, Marco Bianchetti and Ion Mihai develop a universal and efficient approach to numerical FVA calculation for portfolios of general instruments with multiple stochastic assets and funding sources.
The authors presented a generalized pricing framework, where the replication portfolio is split between general, non-linear functions of the portfolio value, funded with different rates, based on Antonov, Bianchetti & Mihai (2013).
In this paper, they also proposed an implementation framework for the calculation of the FVA, which provides a practical and very accurate approximation for portfolios containing both vanilla and exotic instruments. Finally, they presented the numerical results for the FVA of a partially collateralized Bermudan swaption, showcasing the high accuracy of the approximation.
Authors: Alexandre Antonov, Marco Bianchetti, Ion Mihai
Authors
Ion Mihai, PhD
Ion Mihai is a Quantitative Analyst for Numerix. His focus is on developing solutions around CVA, FVA, and Numerix’s CrossAsset Server platform, as well as working with clients and prospects as a pre-sales quant on bespoke solutions and training. He recently co-authored a paper on Funding Value Adjustment with Drs. Alexander Antonov and Marco Bianchetti. Prior to Numerix, Dr. Mihai started his career as a research scientist in Algebraic Geometry at the Weizmann Institute, Israel, following a PhD in Mathematics from the Fourier Institute in Grenoble. After joining the financial software industry, he worked as a quant developer on LMM and other fixed income models, and performed independent valuation for a wide range of derivatives, including: structured rates, short- and long-dated equity exotics, equity baskets and structured credit products.
Dr. Alexandre Antonov
Dr. Antonov received his PhD degree from the Landau Institute for Theoretical Physics in 1997 and joined Numerix in 1998, where he currently works as a Senior Vice President of Quantitative Research. His activity is concentrated on modeling and numerical methods for interest rates, cross currency, hybrid, credit and CVA. Dr. Antonov is a published author for multiple publications in mathematical finance, including RISK magazine and a frequent speaker at financial conferences.
Marco Bianchetti, PhD
Marco Bianchetti joined the Market Risk Management area of Intesa Sanpaolo in 2008. His recent work covers derivative pricing and risk management across all asset classes, with a focus on new product development, model validation, model risk management, funding and counterparty risk, and Quasi Monte Carlo. Previously Dr. Bianchetti worked for 8 years in the front office Financial Engineering area of Banca Caboto (now Banca IMI), developing pricing models and applications for interest rate and inflation trading desks. He is a frequent speaker at international conferences and training sessions in quantitative finance. He holds an MSc in theoretical nuclear physics and a PhD in theoretical condensed matter physics.
