Technical paper
Smiling hybrids
Vladimir Piterbarg develops a multi-currency model with foreign exchange skew suitable for valuation and risk management of forex-linked hybrids, in particular power-reverse dual-currency swaps. The emphasis of the article is on model calibration to…
The real value of stock
Collars involve the payment of a variable amount of stock, depending on an average stock price. In this article, Anthony Pavlovich uses the Black-Scholes framework to value these exotic derivatives and explore issues with hedging, as well as providing an…
Absolute return volatility
The use of absolute return volatility has manymodelling benefits, says John Cotter. An illustration isgiven for the market risk measure, minimum capitalrequirements
CMCDS valuation with market models
There is little, if any, literature available on constant maturity credit default swap valuation. Here, Damiano Brigo builds on his no-arbitrage dynamic credit default swap (CDS) market model to derive a formula involving a 'convexity adjustment' feature…
Pricing illiquidity in energy markets
Illiquidity is sadly a typical feature of many energy derivative markets. In this paper Stefano Fiorenzani proposes the application of a methodology, originally developed for equity markets, to overcome this problem
The theory of LDI
Liability Driven Investments
Sal Oppenheim
Quant Analysis
Dexia Bank
Quant Analysis
Lehman Brothers Holdings
Quant Analysis
Counterparty risk - Wrong-way risk modelling
Cutting edge
Distribuciones de pérdidas neutrales al riesgo insesgadas
Cutting Edge: Derivados de crédito
Padeciendo un aplanamiento
Opciones Sobre Diferenciales de CMS
Commodity options optimised
In 2005, John Crosby introduced a very flexible framework in which it is possible to price derivatives, including exotics, on almost any underlying commodity. In this article, he shows how pricing can be done approximately 30 to 400 times faster than the…
Weighted Monte Carlo
Most pricing models assume an asset behaviour and calibrate its parameters to fit the market. Weighted Monte Carlo is able to calibrate the market without making specific assumptions about the asset behaviour. When only vanilla products are considered,…
Smiling hybrids
Vladimir Piterbarg develops a multi-currency model with foreign exchange skew suitable for valuation and risk management of forex-linked hybrids, in particular power-reverse dual-currency (PRDC) swaps. The emphasis of the article is on model calibration…