Technical papers/Derivatives
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...
A dislocation between options on constant maturity swap rates and spreads in 2009 led to a static arbitrage opportunity. Here, Paul McCloud shows how this can be detected, and how a copula-based model...
The advent of the financial crisis made the previously negligible bases between different overnight interest rates explode. Fabio Mercurio adapts the classic Brace-Gatarek-Musiela Libor market model to...
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More Technical papers/Derivatives articles
Correlations in asynchronous markets
Lorenzo Bergomi addresses the issue of pricing multi-asset options in the context of asynchronous markets. Using the criterion that the carry profit and loss (P&L) vanishes, he derives the expression of the correlation estimator for the asynchronous case....
Post-shock short-rate pricing
The basis between swaps referencing funded fixings and swaps referencing overnight collateralised fixings has increased in importance with the 2007–09 liquidity and credit crises. This basis means that new pricing models for fixed-income staples such...
Smiling jumps
Local jump intensity models, in which the volatility of a Lévy process is made spot-dependent, are difficult to parameterise and calculate. However, they are an important ingredient of credit barrier models, in which the firm value is modelled as a geometric...
Two curves, one price
The financial crisis multiplied the yield curves used to price interest rate derivatives, making traditional no arbitrage pricing no longer valid. By taking into account the basis adjustment bootstrapped from market basis swaps and using a foreign currency...
Breaking correlation breaks
Large deviations in dependencies – correlation breaks – are a hazard when risk managing multi-asset derivatives such as worst-of options. Adil Reghai presents a calibration scheme for local correlation that ensures a basket’s skew is compatible...
Two curves, one price
The financial crisis multiplied the yield curves used to price interest rate derivatives, making traditional no arbitrage pricing no longer valid. By taking into account the basis adjustment bootstrapped from market basis swaps and using a foreign currency...
Two curves, one price
The financial crisis has multiplied the yield curves used to price plain vanilla interest rate derivatives, making classic single-curve no-arbitrage relations and pricing formulas no longer valid. Marco Bianchetti shows that no-arbitrage can be recovered...
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What’s next for fixed-income ETFs and structured products?
UK, 3rd Jul 2013
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Quant Congress USA
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The OTC Derivatives Markets Conference
UK, 26th Sep 2013
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Risk USA
USA, 21st - 24th Oct 2013
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