Cutting Edge
Backtesting expected shortfall: mission accomplished?
A rigorous backtest for ES cannot exist, but a good approximation might do the job
Levelling the playing field of the FRTB’s forex rules
Hany Farag argues that changing the base currency may address FRTB forex asymmetry
Podcast: Acerbi on backtesting ES and FRTB’s patchwork rules
Banque Pictet quant explains a new backtesting method for expected shortfall
The minimally biased backtest for ES
Acerbi and Szekely present a backtest for expected shortfall
Podcast: McClelland on why you need a good MVA model
Numerix quant presents a model aimed at showing the total cost of a trade
Fishing for collateral with neural nets
SocGen quant uses deep learning technique to optimise collateral substitution
Optimal posting of collateral with recurrent neural networks
Pierre Henry-Labordère applies neural networks to a control problem approach for managing collateral
No forward-looking rates? No problem
A commonly used quant model could be the answer to the replacement of forward-looking Libor
Podcast: Gregory and Chung on wrong-way risk modelling
Quants discuss a better way to model wrong-way risk
CVA wrong-way risk: calibration using a quanto CDS basis
Tsz-Kin Chung and Jon Gregory calibrate wrong-way risk with the help of quanto CDS values
Libor replacement: a modelling framework for in-arrears term rates
Andrei Lyashenko and Fabio Mercurio expand rates modelling to the post-Libor world
Capital allocation under the Fundamental Review of the Trading Book
Quants propose an allocation method for internal model capital charges
Podcast: Hans Buehler on deep hedging and harnessing data
Quant says a new machine learning technique could change the way banks hedge derivatives
Podcast: Venturelli and Kondratyev on quantum annealing
Authors show how quantum theory could aid portfolio construction
Beyond Markowitz with quantum annealing
Venturelli and Kondratyev use quantum annealers to optimise portfolios
The fair basis
Wujiang Lou remodels credit arbitrage by introducing funding and capital costs
Podcast: Hong on quanto derivatives and Asia’s quant drought
Credit Suisse quant talks about new paper on valuing quanto options
Skewing quanto with simplicity
George Hong presents an analytical method for pricing quanto options
SA-CCR may need more fundamental fixes
Quants propose tweaks to improve Basel counterparty credit risk framework
Revisiting SA-CCR
Berrahoui, Islah and Kenyon propose an alternative to SA-CCR
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