Potential Future Exposure in the Presence of Initial Margin

This dissertation considers the concept of potential future exposure, and how initial margin can be used to mitigate it. In addition to this, the cost of implementing initial margin is estimated, and some of the difficulties associated with it are addressed. The two primary techniques for calculating initial margin considered are nested Monte Carlo, and Gaussian Least Squares Monte Carlo. These two techniques are compared for effectiveness. It is shown that the nested Monte Carlo technique performs well under numerous conditions, and that the Gaussian Least Squares Monte Carlo relies on particular model and instrument characteristics.

Grantor

African Institute of Financial Markets and Risk Management

Year dc:date.issued

2019

Author dc:creator

• Nevin, James

Advisor dc:contributor.advisor

• McWalter, Thomas

• Mathematical Finance

Handle dc:identifier.uri

http://hdl.handle.net/11427/30891

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/30891