Lecture 10: Counterparty Risk Optimization

MIT 18.642 Topics in Mathematics with Applications in Finance, Fall 2024 Instructor: James Shepherd View the complete course: https://ocw.mit.edu/courses/18-642-topics-in-mathematics-with-applications-in-finance-fall-2024 YouTube Playlist: https://www.youtube.com/playlist?list=PLUl4u3cNGP601Q2jo-J_3raNCMMs6Jves This lecture by James Shepherd from LSEG provides an in-depth explanation of counterparty risk optimization in derivative trading, focusing on key risk measures like Value at Risk (VaR) and Expected Shortfall. It covers the mathematical foundations, practical challenges in margin calculation, and the use of convex optimization techniques to minimize initial margin across networks of financial institutions, highlighting the complexities of real-world implementation and fairness considerations. License: Creative Commons BY-NC-SA More information at https://ocw.mit.edu/terms More courses at https://ocw.mit.edu Support OCW at http://ow.ly/a1If50zVRlQ We encourage constructive comments and discussion on OCW’s YouTube and other social media channels. Personal attacks, hate speech, trolling, and inappropriate comments are not allowed and may be removed. More details at https://ocw.mit.edu/comments.