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Risk magazine

Why be backward?

Originally developed as a tool for calibrating smile models, so-called forward methods can also be used to price options and derive Greeks. Here, Peter Carr and Ali Hirsa apply the technique to the pricing of continuously exercisable American-style put…

Coarse-grained CDOs

While analytical models of credit portfolio risk using conditional independence have been one of the most promising areas of recent research, they often involve granularity assumptions that are violated in CDO reference portfolios. Here, Michael Pykhtin…

Dealing with discrete dividends

Over the past year, we have published several papers on the issue of options on stocks with discrete dividends. At least three distinct models are used by practitioners, involving trade-offs between accuracy and tractability. Here, Remco Bos, Alexander…

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