Technical paper/Optimisation
Optimal closing-price strategy: peculiarities and practicalities
The authors of this paper derive an optimal trading strategy that benchmarks the closing price in a mean–variance optimization framework.
Acceptability bounds for forward starting options using disciplined convex programming
The dual problem of pricing to acceptability is formulated as a disciplined convex program solvable by the software CVXOPT.
Calculation of a term structure power price equilibrium with ramping constraints
This paper proposes a tractable quadratic programming formulation for calculating the equilibrium term structure of electricity prices.
SLADI: a semi-Lagrangian alternating-direction implicit method for the numerical solution of advection–diffusion problems with application to electricity storage valuations
In this paper, an efficient and novel methodology for numerically solving advection–diffusion problems is presented.
Quant ideas: Liquidity in commodity risk management
Liquidity plays a vastly underappreciated role in commodity markets
Modeling a risk-based criterion for a portfolio with options
The presence of options in a portfolio fundamentally alters the portfolio's risk and return profiles when compared with an all-equity portfolio. In this paper, we advocate modeling a risk-based criterion for optioned portfolio selection and rebalancing…
Optimal execution with a price limiter
Balancing the price uncertainty and price impact of large orders is an important issue for many market participants. While classical approaches lead to trading algorithms that are invariably price-path insensitive, in this article, Sebastian Jaimungal…
Options for collateral options
Options for collateral options
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,…
Crossing the frontier
Portfolio risk management
Contributions to credit risk
Optimisation of credit portfolios requires that risk contributions be quantified. However, there has been disagreement over which of three popular tail risk measures should be used. Here, Alexandre Kurth and Dirk Tasche offer a way forward, showing how…
Contributions to credit risk
Optimisation of credit portfolios requires that risk contributions be quantified. However, there has been disagreement over which of three popular tail risk measures should be used. Here, Alexandre Kurth and Dirk Tasche offer a way forward, showing how…
Stress tests and risk capital
For many financial institutions, "stress tests" are an important input into processes that set risk capital allocations. In the current regulatory environment, two distinct model-based approaches for setting regulatory capital requirements include stress…
Value under liquidation
Liquidity