Cutting edge introduction: perturbing the smile

There has been a long history of interaction between physics and quantitative finance. Now a technique for finding the effects of small fluctuations in quantum fields is being used to get a handle on the implied volatility smiles a stochastic model can create. Laurie Carver introduces this month’s technical articles

Concept image of yellow smiley face balls

The bongo-drumming, wise-cracking, safe-cracking, theoretical physicist Richard Feynman understood quantum physics as well as anybody. However, that is not saying much, according to him. “I think I can safely say that nobody understands quantum mechanics,” he once said.

That a man whose advances in the field did so much to illuminate it – and who helped create arguably its most successful scientific theory ever in quantum electrodynamics – could be so resigned to its elusive character does not

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The new rules of market risk management

Amid 2020’s Covid-19-related market turmoil – with volatility and value-at-risk (VAR) measures soaring – some of the world’s largest investment banks took advantage of the extraordinary conditions to notch up record trading revenues. In a recent…

ETF strategies to manage market volatility

Money managers and institutional investors are re-evaluating investment strategies in the face of rapidly shifting market conditions. Consequently, selective genres of exchange-traded funds (ETFs) are seeing robust growth in assets. Hong Kong Exchanges…

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