In this paper, Dan Mahoney and Krzysztof Wolyniec show that in co-integrated (mean-reverting) futures markets, active dynamic hedging is required to realise the quadratic variation of the underlying spread...
This paper deals with volatility estimation in commodity markets. Piotr Grzywacz and Krzysztof Wolyniec note that energy commodities have many time (volatility) scales, which has dramatic implications...
Insurance Risk and BNY Mellon have conducted a survey to look at how insurance companies are preparing for the new regime and the opportunities and challenges that the changes will bring.
More Mean reversion articles
Correlation between asset classes has remained at high levels this year, despite a fall in volatility. This presents a potential opportunity for traders, but could also pose significant risks. By Christopher Whittall
European power prices are very volatile and subject to spikes, particularly in German and Dutch markets. Ronald Huisman and Cyriel de Jong examine the impact of spikes on option prices by comparing prices from a standard mean-reverting model and a regime...
Commodity markets exhibit multi-factor behaviour as well as mean reversion. Building upon their previous paper, David Beaglehole and Alain Chebanier conclude the current Masterclass series by developing a two-factor mean-reverting model for crude oil...
A tendency for a stochastic process to revert over time to an equilibrium level, such as the average (the mean) of historical prices, or some other variable. Interest rates, stock returns, price-earning ratios, and implied volatilities tend to exhibit...
Generating a zero-coupon curve is the first step in pricingany derivative structure, as any practitioner ofinterest rate derivatives knows. To generate thecurve, one needs to calibrate it to the market pricesof benchmark instruments, eg, par interest...
This paper discusses a number of diverse considerations that risk managers need to incorporate into their thought processes and recurring procedures if they are to fulfill their role more effectively in the future
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