Technical paper
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…
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,…
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…
A standard practice?
Cutting Edge: Solvency risk
Citigroup Funding
Quant Analysis
Post Office
Quant Analysis
ING Bank
Quant Analysis
ABN Amro
Quant Analysis
Beyond Black-Litterman: views on non-normal markets
In normally distributed markets, the Black-Litterman technique allows managers to construct portfolios that account for their views on a set of expected returns. Attilio Meucci extends the technique to generic market distributions and shows an…
A structural approach to EDS pricing
Structural credit models have been used to price bothcredit and equity derivatives, making them a naturalframework to price equity default swaps. Using such aframework, Elena Medova and Robert Smith derivean analytic expression for the EDS spread,…
Wrong way risk modelling
Beyond its potential impact on counterparty risk exposure, the wrong way risk arising in some derivatives transactions raises important modelling challenges. Christian Redon presents two suitable models based on conditional expected exposure. Among…
Hedging weather exposure
Volumetric weather risk is usually levered by the commodity price, resulting in cross-commodity exposure known as a quanto. Hedging such exposure with quanto instruments is costly. Victor Dvortsov suggests a simple strategy that allows efficient hedging…
Calibrating inflation
Cutting Edge: Inflation Models
Caja Segovia
Quant Analysis
Aviva
Quant Analysis