Option pricing
Perturbed Gaussian copula: introducing the skew effect in co-dependence
Perturbed Gaussian copula: introducing the skew effect in co-dependence
Being particular about calibration
Being particular about calibration
Q&A: Myron Scholes on LTCM, crisis lessons and the value of intermediation
Quants' golden age
Pricing, Basel, Paulson & Co: the top stories of 2011 so far
A review of the top Risk.net stories during the first half of 2011
Repricing the cross smile: an analytic joint density
Repricing the cross smile: an analytic joint density
Marking systemic portfolio risk with the Merton model
Marking systemic portfolio risk with the Merton model
Multi-currency CSA chaos behind push to standardised CSA
The evolution of swap pricing
Stressed in Monte Carlo
Stressed in Monte Carlo
Volatility interpolation
Volatility interpolation
Multi-currency CSA chaos behind push to standardised CSA
The evolution of swap pricing
Isda working group to draw up new, standardised CSA
Derivatives market set for shake-up as confusion over how to price multi-currency CSA trades drives a push towards a standardised collateral agreement
Choice of collateral currency
Collateral agreements are becoming popular in the over-the-counter derivatives market. Masaaki Fujii and Akihiko Takahashi demonstrate its significant impact on derivatives pricing with a direct link to the cross-currency market. The importance of…
Choice of collateral currency
Choice of collateral currency
Trade of the month: Digital payoffs
Digital options lead to two outcomes and are most commonly used with capital protected structured products.
Correlations in asynchronous markets
Correlations in asynchronous markets
US inflation options sponsored forum: Recovery and development
The inflation market has had a challenging few months. In particular, many dealers were hurt by short positions in 0% inflation floors, causing sizeable losses for some firms. Sponsored by BGC Partners, Risk convened a panel of major inflation dealers in…
Sponsored statement: The problems with generally used interpolation spaces
In a world increasingly focused on effective enterprise-level risk management, there are notable discrepancies in volatility management techniques. Murex proposes a cross-asset interpolation space with potentially significant risk management impacts
The inflation pricing conundrum
Fear of a spike in consumer prices has created greater demand for inflation protection from a variety of participants. This has increased the need for inflation pricing and analytics tools – but it is not as simple as tweaking existing models used for…
Expanded smiles
Implementing models with stochastic as well as deterministic local volatility can be challenging. Here, Jesper Andreasen and Brian Huge describe an expansion approach for such models that avoids the high-dimensional partial differential equations usually…
Interview with Vladimir Piterbarg
Vladimir Piterbarg talks about his new article published in the Cutting Edge section of Risk magazine
Funding beyond discounting: collateral agreements and derivatives pricing
Standard theory assumes traders can lend and borrow at a risk-free rate, ignoring the intricacies of the repo and collateralisation markets. Here, Vladimir Piterbarg shows that these force adjustments to discounting, forward prices and implied…
Smile dynamics IV
Lorenzo Bergomi addresses the relationship between the smile that stochastic volatility models produce and the dynamics they generate for implied volatilities. He introduces a new quantity, the skew stickiness ratio (SSR), and shows how, at order one in…