Model calibration
A flexible commodity skew model with maturity effects
The authors propose an extension to the Andersen commodity curve and calibrate the model to market data for West Texas Intermediate crude oil and for natural gas.
US banks seek to open vendors’ black box on green data
Inaugural Fed climate scenario analysis flags lack of transparency around third-party models
Rabobank cuts back on ECL overlays
Improved backtesting performance reduces add-ons to allowances to lowest in five years
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
Neural joint S&P 500/VIX smile calibration
A one-factor stochastic local volatility model can solve the joint calibration problem
Automatic adjoint differentiation for special functions involving expectations
The authors put forward AAD algorithms for functions involving expectations and use their technique to calibrate European options.
BoE model risk rule may drive real-time monitoring of AI
New rule requires banks to rerun performance tests on models that recalibrate dynamically
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately
The quintic Ornstein-Uhlenbeck model for joint SPX and VIX calibration
A new model that jointly fits the smiles of VIX and SPX is presented
Taking the measure of CMS pricing
Bank of America quants propose comprehensive framework for modelling rate derivatives
Calibration alternatives to logistic regression and their potential for transferring the statistical dispersion of discriminatory power into uncertainties in probabilities of default
This paper compares four calibration approaches to linear logistic regression in credit risk estimation and proposes two new single-parameter families of differentiable functions as candidates for this regression.
Rising star in quantitative finance: Sigurd Emil Rømer
Risk Awards 2023: Doctoral dissertation outlines more efficient way to simulate rough volatility models
Margin for non-cleared European energy trades to jump 80%
Annual recalibration of Simm could catapult some energy firms over relief thresholds
Deep calibration of rough volatility models
Rough vol models are calibrated and fitted to SPX and Vix smiles
Automatic implicit function theorem
New technique can improve use of adjoint algorithmic differentiation in calibration problems
A new fast local volatility model
A local volatility model based on the Bass construction and alternative to Dupire-style models is introduced
Robust product Markovian quantization
In this paper the authors formulate the one-dimensional RMQ and d-dimensional PMQ algorithms as standard vector quantization problems by deriving the density, distribution and lower partial expectation functions of the random variables to be quantized at…
Regularization effect on model calibration
This paper compares two methods to calibrate two popular models that are widely used for stochastic volatility modeling (ie, the SABR and Heston models) with the time series of options written on the Nasdaq 100 index to examine the regularization effect…
What quant finance can learn from a 240-year-old problem
Optimal transport theory offers a data-driven way to calibrate derivatives pricing models