Today, I would like to share the 3rd, and final, part of Lecture no 2. The objective of today’s class is to learn how to benefit from measure transformations. In the lecture, I will show you how the measure changes, the change of numéraire, can simplify a pricing problem. It is another important building block in our journey towards xVA and VaR computations!
Finally, there are 4 homework assignments! Enjoy the lecture (and the homework)!
In today’s lecture we will cover the following subjects:
– Change of Numéraire: Stock Measure
– Change of Numéraire: Dimension Reduction
– The T-Forward Measure
– Summary of the Lecture + Homework
Lecture slides and additional materials you can find in the link in the video’s description.
Lecture 1- Introduction and Overview of the Course
*** Lecture 2- Understanding of Filtrations and Measures
Lecture 3- The HJM Framework
Lecture 4- Yield Curve Dynamics under Short Rate
Lecture 5- Interest Rate Products
Lecture 6- Construction of Yield Curve and Multi-Curves
Lecture 7- Pricing of Swaptions and Negative Interest Rates
Lecture 8- Mortgages and Prepayments
Lecture 9- Hybrid Models and Stochastic Interest Rates
Lecture 10- Foreign Exchange (FX) and Inflation
Lecture 11- Market Models, Convexity Adjustments and Beyond
Lecture 12- Valuation Adjustments- xVA (CVA, BCVA and FVA)
Lecture 13- Historical VaR, SVaR and Expected Shortfall
Lecture 14- Summary of the Course
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