Cutting edge intro: history in the modelling

Bloomberg quant Guyon delivers an alternative to stochastic local volatility

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Quants sometimes turn to physics to tackle the challenges of financial modelling - a move often criticised for introducing complexity and unintuitive parameters into models. In our first technical, Path-dependent volatility, Julien Guyon, senior quant at Bloomberg, introduces a path-dependent volatility (PDV) framework that is calibrated using a technique commonly applied to the study of particle interactions in physics and shows it can capture the relevant dynamics using a single driver.

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