Option pricing
Quanto adjustments in the presence of stochastic volatility
Original headline:
Source: Risk magazine
It is well known that the quanto adjustment in the drift of the underlying has a significant impact on the prices of quanto options. Alexander Giese points out that an additional quanto adjustment in the...
Original headline:
Source: Risk magazine
Lorenzo Bergomi and Julien Guyon derive an expansion of the volatility surface of general stochastic volatility models at second order in volatility of volatility that is accurate for a wide range of strikes....
Original headline:
Source: Risk magazine
Local volatility was, for a long time, seen as being a universal panacea. However, cracks appeared and we have been forced to look elsewhere for a new framework. Philippe Henrotte, co-founder, partner...
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More Option pricing articles
Downgrade termination costs
Original headline:
Source: Risk magazine
Ratings-based (RB) additional termination event (ATE) clauses in International Swaps and Derivatives Association agreements can have a significant impact on the valuation of derivatives portfolios when rating events occur. Fabio Mercurio, Roberto Caccia...
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: requiem for a probabilist
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Source: Risk magazine
The already challenging task of calibrating stochastic volatility models becomes even more complex when rates are random too. But an efficient Monte Carlo approach can be found – by using an esoteric, but neglected, stochastic calculus. Laurie Carver...
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,...
Q&A: Myron Scholes on LTCM, crisis lessons and the value of intermediation...
Original headline:
Source: Risk magazine
Quants received a lot of flak for the crisis, but the profession is on the cusp of a golden age, according to Myron Scholes, co-inventor of the Black-Scholes pricing model. In an interview with Laurie Carver, he also criticises post-crisis regulation,...
Pricing, Basel, Paulson & Co: the top stories of 2011 so far
Published online only
Source: Risk magazine
A review of the top Risk.net stories during the first half of 2011
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