Monte carlo simulation
Banks look to cut corners on CVA computation
Original headline:
Source: Risk magazine
Calculating credit value adjustment correctly for exotic instruments can require the simulation of scenarios within scenarios – and today’s computers may not be up to it. As a result, banks are looking...
Original headline:
Source: Life & Pension Risk
The value-at-risk of portfolios needs to account for non-linear effects in the loss distribution’s dependence on risk factors. Using the classical Cornish-Fisher expansion, Helmut Lutz and Carsten Wehn...
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More Monte carlo simulation articles
Need for speed: banks explore FPGAs for portfolio modelling
Original headline:
Source: Risk magazine
It can take hours for traditional bank systems to run portfolio risk models. That’s too slow for some banks, which are now exploring unwieldy – but quick – field-programmable gate arrays. By Clive Davidson
Cutting Edge introduction: risky contributions
Original headline:
Source: Risk magazine
Value-at-risk is usually calculated via Monte Carlo simulation, making it difficult to see the contributions from different risks. But in some circumstances approximate formulas can be derived that greatly save computing power – and explicitly show...
Hybrid correlation matrices
Original headline:
Source: Risk magazine
Integrating available implied volatility data into a historical correlation matrix is an essential part of calibrating a Monte Carlo credit value adjustment pricing simulation at the portfolio level, but can yield nonsensical results. Someshwar Roy and...
Quants of the year: Jesper Andreasen and Brian Huge, Danske Bank
Original headline:
Source: Risk magazine
The markets classically assumed by quantitative finance trade continuously, are frictionless, infinitely deep and liquid, and often normally distributed – a fiction so enchanting that many modellers mistook it for reality in the pre-crisis years. One...
Perturbed Gaussian copula: introducing the skew effect in co-dependence...
Original headline:
Source: Risk magazine
Gaussian copula models are often used in the industry when single-asset information is quoted but little is known about their joint relation. These models may arise from correlated stochastic Brownian processes with deterministic volatility and correlation....
Being particular about calibration
Original headline:
Source: Risk magazine
Following previous work on the calibration of multi-factor local stochastic volatility models to market smiles, Julien Guyon and Pierre Henry-Labordère show how to calibrate exactly any such model. Their approach, based on McKean’s particle method,...
Why insurers are turning to the least squares Monte Carlo modelling...
Original headline:
Source: Life & Pension Risk
The least squares Monte Carlo method of stochastic modelling is fast being adopted by insurers due to its simplicity and accuracy
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