Traditional methods for the stochastic alpha beta rho model tend to focus on expansion approximations that are inaccurate in the long maturity ‘wings’. However, if the Brownian motions driving the...
US inflation markets have been through some major events in 2012, including the launch of open-ended quantitative easing and knock-on effects from the forced unwind of Greek asset swaps. Against a backdrop...
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 Volatility skew articles
The capital asset pricing model used to determine excess return for a given risk level and allocate assets typically uses historical data, which can be a poor predictor of risk. Here, Adrian Alscher and Angus Graham show that by adapting the model to...
Calibrating a local volatility model to options prices is a complicated process requiring both interpolation of liquid prices and extrapolation beyond them. Recently focus has turned to efficient numerical methods. Here, Alex Lipton and Artur Sepp show...
There is still good value in owning volatility as a risk management tool, either as an overlay to a long equity portfolio or to replace long equity exposure with the upside strategies, says Deutsche Bank strategist
The difference in implied volatility between out-of-the-money puts and calls. The origins of the volatility skew are not always clear, but factors may include reluctance to write calls rather than puts, sentiment about market direction, and supply and...
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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