TARF PSR PFE Model in Excel – Part II This is the second in the series on the calculation of Pre-settlement Risk (PSR) & Potential Future Exposure (PFE) for FX derivatives. We extend the model we used to calculate the PSR & PFE risk measures
TARF PSR PFE Exposure calculation model Pre-settlement Risk (PSR) & Potential Future Exposure (PFE) are calculated to assess counterparty credit risk for derivative transactions. PSR calculates the risk of a counterparty default at a static point in time while PFEs assess the risk over the
Excel convergence hacks for TARF pricing models. Convergence between closed form and simulation model prices is enhanced with variance reduction procedures. It encourages model extension to complex products. For our TARF pricing model in its original form convergence is a challenge. We will try and
TARF Pricing model guide Our new eight part series on TARF Pricing model guide is now live. The objective of the pricing model guide is to introduce both product features and behavior as well as pricing approaches to this common FX structure that can now
Excel TARF Pricing Models – Black Scholes approach Our alternate Excel TARF Pricing model uses the Black Scholes close form solution to find a price. The TARF contract described in the product term sheet above is equal to having a series of forward contracts that
TARF Pricing Models Our two part series on TARF pricing models begins where we stopped with our analysis on TARF hedge effectiveness. We cover both vanilla TARF (without any path dependent options) and Knock in Knock out (KIKO) TARF’s in that discussion. In this post