Cutting Edge
Putting swaptions pricing in the fast lane
Derivatives consultant proposes a model for arbitrage-free pricing
Simple models won’t cut it for systemic risk
Understanding interconnectedness and capturing it within models is a key challenge, say quants
Podcast: Roos on swaptions arbitrage and benchmark reform
Benchmark reform means additional work for rates quants
Discrete time stochastic volatility
Quant proposes faster model to price arbitrage-free swaptions
Podcast: Fries on Monte Carlo, Greeks and the future of AAD
Research on AAD is not complete until it becomes easier to implement, says quant
Risk transformation of a zero-subsidy wind portfolio
Joaquin Narro analyses the hedging of a hypothetical zero-subsidy wind portfolio with base load products in the futures markets
Rogue traders versus value-at-risk and expected shortfall
VAR and ES are ineffective to deter rogue trading
How not to control trading behaviour
Quants show popular risk measures fail to limit risk-seeking behaviour among traders
Curbing rogue behaviour
Regulators should try to combat rogue trading by measuring traders’ risk-taking differently, say quants
XVA: back to CVA?
Fundamental questions on CVA remain unanswered, writes mathematical finance head
Multicurve modelling is about to get more complex
Research into rates pricing is becoming more urgent given recent regulatory changes
Podcast: Mercurio on Libor, fraud and writing models on a plane
Post-Libor environment and financial crime detection to drive future research, says top quant
The present of futures
Fabio Mercurio introduces a new multi-curve model for pricing futures convexity adjustments
Navigating the new energy market dynamics
Utilities need to adapt to compete in the “new normal” environment of renewable energy supply
What causes forex correlation swaps to be mispriced?
UBS quants show prices can differ by up to 25 correlation points if products modelled accurately
Foreign exchange correlation swap: problem solver or troublemaker?
A correlation structure is an important element in pricing products such as correlation swaps
Podcast: Callegaro, Fiorin and Grasselli on quantization
High-dimension problems can be solved with discretisation techniques
American quantized calibration in stochastic volatility
Fiorin, Callegaro and Grasselli show how discretisation methods reduce computing time in high-dimensional problems
Time to move on from risk-neutral valuation?
Risk-neutral valuation could be replaced by models with a subjectivity element, writes mathematical finance head
Intraday power storage and demand optionality
George Levy discusses the value of intraday power storage and demand optionality in UK power contracts
Podcast: Brigo on derivatives, AI, machine learning and more
Genuine artificial intelligence remains "very, very far away", says Imperial College's Brigo