18.642 | Fall 2024 | Undergraduate

Topics in Mathematics with Applications in Finance

Lecture 10: Counterparty Risk Optimization

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.

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Fall 2024
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