Risk Australia Autumn 2011

Counting the costs

Derivatives pricing used to seem so easy, at least for less complex instruments. Until three years ago, financial engineers, traders and risk managers had largely agreed on the appropriate use of models and techniques that underpinned the pricing and risk management associated with popular instruments. Managing books with over-the-counter interest rate swaps or foreign exchange and equity options was no longer rocket science. That all changed with the advent of the global financial crisis – the