Mathematical Finance & Financial Data Science Seminar

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Funding and Counterparty Credit Costs for CCP and OTC Trading

Speaker: Leif B. Andersen, BAML and NYU Courant Institute

Location: Warren Weaver Hall 1302

Date: Tuesday, May 1, 2018, 5:30 p.m.

Synopsis:

With regulatory pushes for CCP-based trading and for the application of initial margin in OTC trading, the funding and counterparty credit risk areas are undergoing a fundamental transition. In this talk, we discuss practical ways to measure credit and funding costs in the new market reality. We present new theory for certain classes of locally elliptical processes, and show how this theory can be used to generalize Ito processes and to conveniently calculate CVA and MVA in a fat-tailed setting. We cover both OTC bilateral trading, as well as the more complicated situation where a bank trades as a clearing member of a CCP.

Bio:

Leif B. G. Andersen is the Global Co-Head of the Quantitative Strategies Group at Bank of America Merrilly Lynch.  He holds MSc's in Electrical and Mechanical Engineering from the Technical University of Denmark, an MBA from University of California at Berkeley, and a PhD in Finance from University of Aarhus Business School.  He was the co-recipient of Risk Magazine's 2001 and 2018 Quant of the Year Award, and has worked for a quarter century as a quantitative researcher in the derivatives pricing area.  He has authored influential research papers and books in all areas of quantitative finance, including the three-volume monograph "Interest Rate Modelling" (co-authored with Vladimir Piterbarg).  He is an Associate Editor of Journal of Computational Finance, and is an Adjunct Professor at Carnegie Mellon's Tepper School of Business and at NYU's Courant Institute.