Cutting Edge
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
The revised P&L attribution test and the suitability of new proposed thresholds
Montoro, Spinaci and Georgi assess the effectiveness of the FRTB’s P&L attribution test
Is AD the answer to quicker MVA calculation?
Quants propose faster technique for Simm-MVA based on algorithmic differentiation
Podcast: Antonov on MVA, algorithmic differentiation and model validation
StanChart quant proposes new technique to compute MVA quicker
Efficient Simm-MVA calculations for callable exotics
Algorithmic differentiation are used to simulate sensitivities to calculate MVA
Financial risks don’t go on holiday
Better mapping of financial system would help avoid seasonal surprises, argues Andrew Lo
Podcast: SocGen quants on exotics calibration, machine learning and autocallable pricing
Deep learning techniques are being explored by the quants to speed up exotics pricing
How old calibration techniques can be applied to exotics pricing
SocGen quants propose technique to more accurately calibrate exotic options
Equity modelling with local stochastic volatility and stochastic discrete dividends
SocGen quants calibrate local stochastic volatility models with stochastic dividends
Podcast: Lo on adaptive regulation, machine learning, bitcoin
MIT quant says next project will be to combine behavioural science with tech such as machine learning
Swaptions vol modelling tweak opens up pricing possibilities
Nomura quant proposes local volatility model that can directly calibrate to swaption smiles
The swap market model with local stochastic volatility
An easy to calibrate and accurate swap market model is proposed
CVA pricing for commodities with WWR
A calculation of CVA integrating a commodity futures exposure with probability of an event under WWR and credit downgrades
If regulations don’t bend, they’ll break
Financial regulation should be adaptive, not reactive, argues Andrew Lo
Podcast: Richard Martin on EM debt, copulas, machine learning
Quant sceptical of machine learning algos and black boxes
Emerging market corporate bonds as first-to-default baskets
Modified Merton model offers insights on EM corporate debt
How machine learning could aid interest rate modelling
Standard Chartered quant proposes machine-learning technique to better capture rate dynamics
Model risk in the transition to risk-free rates
Transition is an opportunity to reduce multi-rate complexities, say Bakkar and Brigo
Podcast: Quantum computing to boom in next three to five years
Quant speaks of collaboration with Nasa and machine-learning algos for yield curves
Curve dynamics with artificial neural networks
Artificial neural networks can replace PCA for yield curves analysis