《Group 5_Delta KKI_Project Plan_MAFS 5220_20150213》.pdf

GROUP PROJECT – UNILATERAL CVA OF FX FORWARD By Delta KKI (Group 5) MAFS 5220, Spring 2014-15 Kenric Cheong (CHEONG, Siu Sing) - Zhou Lei Xu (XU, Zhou Lei) - Ken Tsui (TSUI, Hin Kan) - Selected Project • Project #8: Compute the unilateral CVA of a FX forward • Difficulty rating: 1.5 • Objective: To develop a model to calculate the unilateral CVA of a FX forward contract with C++ and QuantLib Work Flow • There are five stages in this project. They are Research, Design, Construct, Review and Document. • It is not an one way process. Stages are overlapping and we may revisit previous stages. • For example, tasks in Research and Design stages are in progress at the same time. In addition, when the project is a Construct stage, we may have to revisit the Design stage. Research Design Construct Review Document Research Before developing the model, research on the below topics / areas must be conducted: • Methodology to calculate the fair value of a FX forward • Methodology to calculate the unilateral CVA • Libraries of QuantLib required to price a FX forward • Libraries of QuantLib required to calculate the unilateral CVA • Model validation methods • UAT conditions Sources of information are internet, reference books, academic papers etc. Design With information / knowledge related to the model development are collected, the following must be designed before the model development is started. • Flowchart of calculating the fair value of a FX forward • Flowchart of calculating the CVA of a FX forward • List of Quantlib libraries involved • Model validation methods and model performance measures • UAT procedures and testing conditions Construct Construct is the stage which includes model development, programming and all the tools required. • C++ program to calculate the fair value of a FX forward • C++ program to calculate the CVA of a FX forward • Instrume