Derivatives Risks as Costs in a One-Period Network Model

7 Feb 2022  ·  Dorinel Bastide, Stéphane Crépey, Samuel Drapeau, Mekonnen Tadese ·

We present a one-period XVA model encompassing bilateral and centrally cleared trading in a unified framework with explicit formulas for most quantities at hand. We illustrate possible uses of this framework for running stress test exercises on a financial network from a clearing member's perspective or for optimizing the porting of the portfolio of a defaulted clearing member.

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