Implied volatility
Reconstructing volatility
Equity derivatives
Mean-reverting smiles
Commodity markets such as crude oil exhibit mean reversion as well as option smiles. David Beaglehole and Alain Chebanier meet this challenge, constructing a model suitable for pricing exotic options in these markets
Pricing default baskets
Nicholas Dunbar, Risk’s technical editor, introduces the first in a new series of technical papers written by quants at Deutsche Bank.“Default correlation has been one of the hottest topics in credit derivatives over the past year. So it is a pleasure to…
Crises and volatility
Stress testing
The taming of the skew
Implied volatility
A mixed-up smile
Implied volatility
Swaptions with a smile
Masterclass – with JP Morgan
The tree of knowledge
Options
Rates of skew
Interest rate models
If the skew fits
Volatility
Regimes of volatility
Options markets
Pricing with a smile
Bruno Dupire shows how the Black-Scholes model can be extended tomake it compatible with observed market volatility smiles, allowingconsistent pricing and hedging of exotic options