Technical paper
Smooth calibration of Markov functional models for pricing exotic interest rate derivatives
The Libor market model is widely used but often criticised for its slowness. Nick Denson and Mark Joshi develop an accurate and stable calibration procedure that allows for the effective use of a control variate
Translating overnight and intraday returns to improve daily volatility forecast accuracy
Lost in translation: Accuracy versus profitability of intraday, overnight and volume information for volatility-based trading
Calculation of aggregate loss distributions
Research Papers
Pricing distressed CDOs with base correlation and stochastic recovery rates
In 2008 and 2009, the calibration of the standard Gaussian copula model for collateralised debt obligations has frequently broken down. To overcome that problem, Martin Krekel has embedded the model with correlated stochastic recovery rates. He shows…
Factors on demand
Attilio Meucci introduces a multi-asset-class return decomposition framework that extends beyond the standard systematic-plus-idiosyncratic approach. This framework, which rests on the conditional link between flexible bottom-up estimation factor models…
A dynamic model for leveraged funds
Guido Giese derives a model for the performance and Sharpe ratio of leveraged and inverse index funds that follow a dynamic leveraged trading strategy, that is, they are rebalanced on a daily basis to ensure a constant degree of leverage with respect to…