Tid: 12 maj 2008 kl 15.15-16.00

Plats : Seminarierummet 3733, Institutionen för matematik, KTH, Lindstedts väg 25, plan 7. Karta!

Föredragshållare: Alexander Ruben

Titel: Long-term simulation of yield curves and the computation of Potential Future Exposure for counterparty risk measurements

Sammanfattning: The Basel II framework introduced new methods for the calculation of counterparty credit risk for OTC-derivatives. One of these methods is the Internal Model Method which may use a simulation based approach in order to quantify counterparty exposures in terms of Potential Future Exposure and Exposure at Default. In this thesis we use sophisticated term-structure models for the estimation of counterparty exposures for horizons reaching beyond ten years. The exposures we will focus on are driven by the interest rate as a risk factor, which is why we specifically will look at long-term simulations of the yield curve. We will define what requirements an interest-rate model must fulfil in order to be considered for Basel II use, furthermore we will investigate the Hull-White model, the G2++ model and the Libor Market Model for our purpose of quantifying future counterparty exposures. Regarding these models we will look at calibration issues and simulations of zero-coupon bond prices and yield curves in order to conclude what model to use for our purpose.

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