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        1. Papers
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        Andersen Pykhtin Sokol 2016

        • Overview
        • Tests
        Tests
        • Figure 2
          • Figure 4
            • Figure 5
              • Figure 6
                • Figure 7
                  • Figure 9
                    • Figure 10
                      • Figure 11
                        • Vanilla Swap Portfolio Tests
                          • Xccy Swap Portfolio Tests
                            • VanillaSwapPortfolioTests.cs
                            • XccySwapPortfolioTests.cs
                          1. Tests

                          Figure 11

                          Trade

                          Vanilla swap portfolio consists of 50 USD interest rate swaps; fixed coupons (2%) paid semi-annually, floating coupons paid quarterly.

                          Cross currency swap portfolio consists of 50 cross-currency rate swaps; fixed EUR coupons (3%) paid semi-annually, floating USD coupons paid quarterly.

                          Model

                          Scenarios computed by uncorrelated Hull-White models for the interest rates, with the initial USD and EUR yield curves flat at 2% and 1%, respectively, Gaussian (basis point) volatilities of 1%, and mean reversion speeds of 5%. The exchange rate is log-normal, with USD/EUR spot at 1.2 and a constant FX diffusion volatility of 10%.

                          Note: as the FX rate has random drift (due to the volatility of the USD and EUR interest rates), the implied FX volatility is, of course, larger than the diffusion volatility.

                          Exposure

                          Expected exposures are computed by brute-force daily simulation using Conservative calibration with and without initial margin protection. The margin agreement uses daily margin transfers, no thresholds, and no MTA/rounding. The initial margin level is estimated using 10-day model VaR. It is further assumed that no initial margin is returned to the counterparty during MPR.

                          Table of Contents

                          Vanilla Swap Portfolio Tests
                          Xccy Swap Portfolio Tests
                          VanillaSwapPortfolioTests.cs
                          XccySwapPortfolioTests.cs
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