Risk magazine - Volume19/No5

The German deficit dilemma

German municipalities are turning to the derivatives market to manage the interest rate risks on their massive deficits. Will these instruments relieve their problems or add to them? Rachel Wolcott investigates

Smiling hybrids

Vladimir Piterbarg develops a multi-currency model with foreign exchange skew suitable for valuation and risk management of forex-linked hybrids, in particular power-reverse dual-currency (PRDC) swaps. The emphasis of the article is on model calibration…

Weighted Monte Carlo

Most pricing models assume an asset behaviour and calibrate its parameters to fit the market. Weighted Monte Carlo is able to calibrate the market without making specific assumptions about the asset behaviour. When only vanilla products are considered,…

Commodity options optimised

In 2005, John Crosby introduced a very flexible framework in which it is possible to price derivatives, including exotics, on almost any underlying commodity. In this article, he shows how pricing can be done approximately 30 to 400 times faster than the…

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