Cutting Edge
Podcast: Mathieu Rosenbaum on the rough Heston model
Combination of rough volatility and the classical Heston model gives promising results
Roughening Heston
El Euch, Rosenbaum, Gatheral combine a rough volatility model with the classical Heston model
Will the Nasdaq default spur CVA for CCPs?
Quant proposes model to calculate bank credit risk exposure to CCP
Central counterparty CVA
Matthias Arnsdorf proposes a method to calculate the counterparty risk related to CCP membership
Tying allocation to selection
Hamza Bahaji introduces a new approach to core-satellite investing, the compound portfolio insurance
Podcast: Mercurio and Henrard on the impact of Libor reform
Some derivatives products will become more complex if there are no forward rates, say quants
Could machine learning improve CVA and IM calculations?
Banks have built ways to calculate CVA more quickly, but neural networks could offer more accurate method
CVA and IM: welcome to the machine
Henry-Labordere proposes a neural networks-based technique to price counterparty risk and initial margin
Keep it real: tail probabilities of compound distributions
Igor Halperin proposes new approach to compute probabilities of heavy-tailed distributions
Podcast: Princeton’s Carmona on the future of quant education
Course director discusses machine learning explainability and reclaiming game theory from economists
Calling out autocallable pricing
Quants show popular autocallable pricing technique has a flaw that has been ignored until now
The interplay between stochastic volatility and correlations in equity autocallables
Study shows issues with pricing autocallables using SLV
Podcast: Kenyon and Berrahoui on the pitfalls of PFE
Quants propose replacement to existing credit risk measure
Counterparty trading limits revisited: from PFE to PFL
The potential future loss is proposed as a replacement for PFE
Degree of influence: are machines starting to learn finance?
This year's analysis recognises a turning point in machine learning applications
The Garch linear SDE: explicit formulas and the pricing of a quanto CDS
A new closed-form approximation is applied to quanto CDS pricing
You don’t need to sacrifice accuracy for flexibility
BAML quant proposes option pricing model that softens conflict between the two properties
Doing well by doing good
Drug approval swaps and megafunds can channel capital towards world’s greatest problems, writes MIT’s Lo
Podcast: Dominique Bang on his stochastic local vol model
New approach delivers quick and accurate computation of prices
Local stochastic volatility: shaken, not stirred
Dominique Bang introduces a novel LSV approach to term distribution modelling
How replication simplifies pricing of vol exotics
Barclays quants replicate knock-out corridor swaps using barrier options in bid to make pricing easier
Knocking out corridor variance
Amine Ahallal and Olaf Torne add a knock-out barrier to the standard corridor variance swap
All the news that’s fit to print
While the benefits of the information revolution are clear, the risks it brings should not be underestimated, says Andrew Lo
Black was right: price is within a factor 2 of value
CFM’s quants verify Fisher Black’s intuition on mean reversion still applies today