Derivatives Modelling

We develop and implement state-of-the-art models for derivatives valuation. Besides the obvious focus on price determination VAR Strategies focuses on risk assessment and hedging strategies.

  • We perform an analysis of the key economic drivers behind the value of the product. For structured products a full risk assessment is made to determine the consequences in normal, but especially in extreme scenarios.
  • Model selection: based on our analysis of the key drives we select a variety of suitable models based on realistic dynamics, computational efficiency, user-friendliness and intuition of parameter specification.
  • Hedging Strategy: after the model selection a hedging strategy is stipulated. Furthermore, the effectiveness of the hedging strategy is tested following the specified model dynamics.
  • Robustness: In addition to the within-model hedge effectiveness we analyse the hedge effectiveness in case of model mis-specification.

XVA Modelling

With the increased focus on counterparty risk and increased regulation the modelling of

  • Speed:We have implemented an very fast and robust method to evaluate CVA, DVA, and FVA.
  • Model selection: Contrary to most banks our methodology allows for a variety of models without the need to have analytic valuation formulas or to approximate the portfolio value using a parametric function.
  • Risk: Risk is computed fast and on the fly.