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Financial Engineering Workshop - Chris Kenyon (MUFG)
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Abstract
We introduce Climate Change Valuation Adjustment to capture climate change impacts on CVA+FVA that are currently invisible assuming typical market practice. To discuss such impacts on CVA+FVA from changes to instantaneous hazard rates we introduce an extensible and expressive parameterization to capture the path of this impact to climate change endpoints, and transition
effects. Finally we provide quantification of examples of typical interest where there is risk of economic stress from sea level change up to 2101, and from transformations of business models. We find that even with the slowest possible uniform approach to a climate change impact in 2101 there can still be significant CVA+FVA impacts on interest rate swaps of 20 years or more maturity. Transformation effects on CVA+FVA are strongly dependent on timing and duration of business model transformation. Using a parameterized approach enables discussion with stakeholders of economic
impacts on CVA+FVA, whatever the details behind the climate impact.
Bio
Chris Kenyon is global head of quant innovation at MUFG, and also global head of XVA quant modelling for MUFG. Previously Chris was head of XVA quant research at Lloyds Banking Group, worked at Credit Suisse, and at Depfa Bank plc he was the post-crisis head of structured credit valuation after working
on inflation-rates hybrids introducing new smile models. Chris formalized KVA and MVA with Andrew Green, as well as PFL as the replacement for PFE, and a short-rate multi-curve model, all in Risk Cutting Edge papers. More recently he introduced a climate change valuation adjustment (CCVA). Chris has a PhD from Cambridge University, published 17 papers in the Cutting Edge section of Risk magazine - twice joint top-cited author, and holds 10 US patents.
The Financial Engineering Workshop will take place online via Microsoft Teams.
For the link to the online seminar please register before 2pm on the day of the seminar otherwise you will not be given access.
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Online Event
Online Event