Exotic options
Hedge funds ease off profitable China FX options trade
Some still hold positions but an appreciating renminbi may make them less profitable for now
Japan autocall curbs upend Nikkei vol
Lack of reinvestment alongside FSA review forces scramble to buy back hedges as products knock out
Structured products house of the year: JP Morgan
Risk Awards 2023: Tech investment propels fixed income expansion and back-to-back autocall hedges
Vega decomposition for the LV model: an adjoint differentiation approach
Introducing an algorithm for computing vega sensitivities at all strikes and expiries
‘Perfect’ VKO trades knock the smile off vol
Dealer hedging of options which profit from ‘spot down, vol down’ may have amplified rare dynamic
Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
Semi-analytic conditional expectations
A data-driven approach to computing expectations for the pricing and hedging of exotics
Singular exotic perturbation
A solution based on local volatility and sensitivities is proposed to calculate exotics' prices
Yen exotics re-hedging fuelled vol surge, say traders
USD/JPY spike forced dealer stampede into call options, pushing FX vol even higher
Rough volatility moves to exotic frontiers
New simulation scheme clears the way for broader application of the rough Heston model
JP Morgan testing deep hedging of exotics
Neural network trained to hedge complex options using simulated data expected to go live this year
Dynamically controlled kernel estimation
An accurate data-driven and model-agnostic method to compute conditional expectations is presented
Podcast: Antonov on pricing not-so-vanilla rates products
New model makes it easier to coherently price correlated derivatives
Podcast: Piterbarg on medians and machine learning
How the Libor transition inspired NatWest quant’s latest paper on exotic derivatives valuation
Gradient boosting for quantitative finance
In this paper, the authors discuss how tree-based machine learning techniques can be used in the context of derivatives pricing.
Introducing two mixing fractions to a lognormal local-stochastic volatility model
In this paper, the authors introduce two mixing fractions that can be controlled separately to apply impact to the volatility-of-volatility and the correlation in a lognormal LSV model.
Breaking barriers in options pricing
A new technique for pricing exotic options unifies two classic models
On extensions of the Barone-Adesi and Whaley method to price American-type options
This paper provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models and American barrier-type options under the Black–Scholes framework.
Autocalamity: can hit product be reinvented?
Spreads on ‘worst-of’ bonds leap 50% as some dealers retreat and others pile on hedges
Pressure grows on structured products as losses mount
Dividend-related losses at BNP Paribas may be higher than previously reported
Deutsche to sell exotic equity derivatives portfolio
Structured trades go on the block following last month's sale of flow and prime broking assets
Dealers rush to redeem high-yielding structured notes
An estimated $60 billion of structured notes are at risk of being called before year-end
Remembering the range accrual bloodbath
Flatter US yield curve spurs demand for a product with a painful history
Risky notes replace easy money for exotics desks
Dealers insist ‘it’s different’ as flat US curve revives bonds that sank the Street in 2008