Quantitative analysis
Caixa Geral
Quant Analysis
Morgan Stanley
Quant Analysis
Stratégie Euro Prestige
Quant Analysis
Banca Aletti
Quant Analysis
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…
The theory of LDI
Liability Driven Investments
Sal Oppenheim
Quant Analysis
Dexia Bank
Quant Analysis
Lehman Brothers Holdings
Quant Analysis
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…
A standard practice?
Cutting Edge: Solvency risk
Citigroup Funding
Quant Analysis
Post Office
Quant Analysis
ING Bank
Quant Analysis
ABN Amro
Quant Analysis
Beyond Black-Litterman: views on non-normal markets
In normally distributed markets, the Black-Litterman technique allows managers to construct portfolios that account for their views on a set of expected returns. Attilio Meucci extends the technique to generic market distributions and shows an…
Structural credit calibration
Damiano Brigo and Massimo Morini introduce first-passage models with time-varying volatility and random default barriers, while illustrating their tractability, exact calibration and economic interpretation. The models' behaviour on Parmalat data prior…
A structural approach to EDS pricing
Structural credit models have been used to price bothcredit and equity derivatives, making them a naturalframework to price equity default swaps. Using such aframework, Elena Medova and Robert Smith derivean analytic expression for the EDS spread,…
Wrong way risk modelling
Beyond its potential impact on counterparty risk exposure, the wrong way risk arising in some derivatives transactions raises important modelling challenges. Christian Redon presents two suitable models based on conditional expected exposure. Among…