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MARGIN VALUATION ADJUSTMENT of an INTEREST RATE SWAP
Mälardalen University, School of Education, Culture and Communication.
2019 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

After the last financial crisis, regulators started to strengthen the measures to reduce the risk on the financial market by requiring margin to be posted. In addition to the Variation Margin that reflects the daily change in market value of the contracts, Initial Margin has to be posted to compensate the fluctuation of the collateral value. The Margin Valuation Adjustment (MVA) represents the funding price of the initial margin that has to be calculated. The numerical calculation of the MVA is a real challenge as it requires to run a Monte Carlo simulation inside another Monte Carlo simulation. However, alternative formula could be used to approximate the result of the MVA. This thesis highlights the essential notion about the MVA and the available tools to calculate its value.

Place, publisher, year, edition, pages
2019. , p. 71
Keywords [en]
Basel II, Basel III, OTC Derivatives, Credit Valuation Adjustment, Counterparty Credit Risk, VaR and ES, Regulations, Initial Margin, Margin Valuation Adjustment, CCP, SIMM, Netting, OIS, Libor Model.
National Category
Mathematics
Identifiers
URN: urn:nbn:se:mdh:diva-46245OAI: oai:DiVA.org:mdh-46245DiVA, id: diva2:1375517
Subject / course
Mathematics/Applied Mathematics
Supervisors
Examiners
Available from: 2019-12-06 Created: 2019-12-05 Last updated: 2019-12-06Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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Output format
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