arXiv Open Access 2019

Distributionally Robust XVA via Wasserstein Distance: Wrong Way Counterparty Credit and Funding Risk

Derek Singh Shuzhong Zhang

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Abstrak

This paper investigates calculations of robust XVA, in particular, credit valuation adjustment (CVA) and funding valuation adjustment (FVA) for over-the-counter derivatives under distributional uncertainty using Wasserstein distance as the ambiguity measure. Wrong way counterparty credit risk and funding risk can be characterized (and indeed quantified) via the robust XVA formulations. The simpler dual formulations are derived using recent infinite dimensional Lagrangian duality results. Next, some computational experiments are conducted to measure the additional XVA charges due to distributional uncertainty under a variety of portfolio and market configurations. Finally some suggestions for future work are discussed.

Topik & Kata Kunci

q-fin.MF q-fin.RM

Penulis (2)

Derek Singh

Shuzhong Zhang

Format Sitasi

APA MLA BibTeX

Singh, D., Zhang, S. (2019). Distributionally Robust XVA via Wasserstein Distance: Wrong Way Counterparty Credit and Funding Risk. https://arxiv.org/abs/1910.01781

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Informasi Jurnal

Tahun Terbit: 2019
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓