Technical paper/Monte Carlo simulation
Project risk: improving Monte Carlo value-at-risk
Cashflows from projects and other structured deals can be as complicated as we are willing to allow, but the complexities of Monte Carlo project modelling need not complicate value-at-risk calculation. Here, Andrew Klinger imports least-squares valuation…
Asian basket spreads and other exotic averaging options
Giuseppe Castellacci and Michael Siclari of OpenLink introduce a class of exotic options that simultaneously generalises both Asian and basket options. They develop approximate analytic models for real-time pricing of complex instruments that average…
How to avoid overestimating capital charges for op risk
Pooling internal and external data is a central issue to estimating capital charges for operational risk. Here, Nicolas Baud, Antoine Frachot and Thierry Roncalli of Crédit Lyonnais discuss the methodology they have developed.
Reconciling ratings
How should internal credit ratings be calibrated to long-term default rates? This multibillion-dollar question is at the heart of the debate over Basel’s IRB approach. In thisarticle, Stefan Blochwitz and Stefan Hohl use simulations to demonstrate wide…
Hedge your Monte Carlo
Option pricing
Beyond the lognormal
Value-at-risk
Calculating with counterparties
Masterclass – with JP Morgan