Model calibration
A nonparametric local volatility model for swaptions smile
This paper proposes a nonparametric local volatility Cheyette model and applies it to pricing interest rate swaptions.
Local volatility models in commodity markets and online calibration
This paper introduces a local volatility model for the valuation of options on commodity futures by using European vanilla option prices.
Model calibration with neural networks
Andres Hernandez presents a neural network approach to speed up model calibration
Calibration of temperature futures by changing the mean reversion
The authors of this paper study the calibration of futures contracts on temperature indexes.
Calibration of local correlation models to basket smiles
The authors build a whole family of local correlation models by combining the particle method with a new, simple idea.
Exposing actionable insights in credit risk management
Sponsored webinar: Moody's Analytics and Qlik
Path-consistent wrong-way risk: a structural model approach
The author of this paper presents a general and path-consistent wrong-way risk (WWR) model that does not require simulation of credit and market variables simultaneously.
A reduced basis method for parabolic partial differential equations with parameter functions and application to option pricing
The authors introduce an RB space–time variational approach for parametric PPDEs with coefficient parameters and a variable initial condition.
Interest rate models enhanced with local volatility
Lingling Cao and Pierre Henry-Labordère implement Dupire's local volatility in interest rate models
A point-in-time–through-the-cycle approach to rating assignment and probability of default calibration
This paper proposes a methodology for constructing TTC rating grades and assessing the resulting degree of PIT-ness.
Managing temperature-driven volume risks
This paper proposes a stochastic model for coupled natural gas spot prices and temperature.
B-spline techniques for volatility modeling
In this paper the use of B-splines is advocated for volatility modeling within the calibration of stochastic local volatility (SLV) models and for the parameterization of an arbitrage-free implied volatility surface calibrated to sparse option data.
The efficient application of automatic differentiation for computing gradients in financial applications
Automatic differentiation is the theme of this paper. The authors show that many functions in calibration and inverse problems, exhibit a natural substitution structure. A significant speedup is achieved compared with common reverse-mode AD.
Quant ideas: Strategic versus tactical risk management
The susceptibility of enterprise risk tools to poor quality data is a major issue
Options Clearing Corp faces pressures of systemic status
Disaster recovery and oversight key for utility's CRO
Hybrid smiles made fast
Hybrid smiles made fast
Cutting Edge introduction: requiem for a probabilist
Requiem for a probabilist
Being particular about calibration
Following previous work on the calibration of multi-factor local stochastic volatility models to market smiles, Julien Guyon and Pierre Henry-Labordère show how to calibrate exactly any such model. Their approach, based on McKean’s particle method,…
Quant Congress Europe: Peter Carr introduces ‘meta-modelling’
Morgan Stanley quant tells Risk's annual European quantitative finance event that modelling assumptions should be considered in light of calibration needs - even if this leads to discrepancies