Quantitative analysis

Smoking adjoints: fast Monte Carlo Greeks

Monte Carlo calculation of price sensitivities for hedging is often very time-consuming. Michael Giles and Paul Glasserman develop an adjoint method to accelerate the calculation. The method is particularly effective in estimating sensitivities to a…

Operational VAR: a closed-form approximation

Klaus Böcker and Claudia Klüppelberg investigate a simple loss distribution model for operational risk. They show that, when loss data is heavy-tailed (which in practice it is), a simple closed-form approximation for operational VAR can be obtained. They…

Time for multi-period capital models

Several financial institutions use single-period models to determine their credit portfolio loss distribution, calculate their loss volatility and assign economic capital. Here, Kevin Thompson, Alistair McLeod, Panayiotis Teklos and Shobhit Gupta…

Trading down the slopes

The credit derivatives market is growing at an impressive rate, with the credit default swap (CDS) being the most popular instrument. This article is relevant for the trading of CDSs and bond portfolios. Mascia Bedendo, Lara Cathcart, Lina El-Jahel and…

Unbiased risk-neutral loss distributions

Luigi Vacca introduces entropy maximisation (ME) to derive portfolio loss probabilities that are consistent with standard tranche prices on a credit default swap index. Tranche prices that are calculated using ME are free of arbitrage. A numerical…

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