Risk magazine - Volume18/No9

A Merton approach to transfer risk

Transfer risk is the risk that debtors in a country are unable to ensure timely payments of foreign currency debt service due to transfer or exchange restrictions, or a general lack of foreign currency. Although this risk is not extensively addressed in…

Back to the future

Current developments in exotic interest rate products push the demand for more sophisticatedinterest rate models. Here, Jesper Andreasen presents a new class of stochastic volatility multifactoryield curve models enabling quick calibration and efficient…

A fully lognormal Libor market model

In the Gaussian Heath-Jarrow-Morton model, all discount factors are lognormal under allforward measures. The Libor market model does not have this property – only the relevantforward Libor rate is lognormal under a given forward measure. However, all…

A perfect storm

Hedge fund investors have pulled billions of dollars out of convertible arbitrage strategies over the past year, but some managers now reckon the market has bottomed out. Is the strategy turning the corner? By Duncan Wood

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