Pricing
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates is presented
Plugging the leaks in skewed pricing
Liquidity recycling has made it trickier for LPs to identify information leakage
Podcast: Artur Sepp on rates volatility and decentralised finance
Quant says high volatility requires pricing and risk management models to be revisited
Shhh, don’t tell: the struggle to keep skew under wraps
Liquidity recycling by clients has made it more difficult for banks to keep skews quiet
EU’s late CDS transparency push triggers trader fears
Leaked proposal to shoehorn public disclosure of CDS into Mifir placates Esma, but alarms traders
Dora ‘critical tech vendor’ designation could cast a wide net
Experts think cloud services, data providers and software firms are all in regulators’ sights
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
SG1 growth slower than expected, say LPs
Despite sluggish take-up of Singapore FX matching engines, some hope a new NDF venue will offer a boost
It’s not easy being green: why the FX market is lagging on ESG
And what’s being done to fix it
FX primary venues seek reversal of fortunes
EBS and Refinitiv fight to restore market share – but bilateral trading may be too entrenched, dealers say
Illiquid assets throw UK pensions off balance
Collapse in equity and bond prices leaves some funds with outsized exposure to private holdings
Regional banks beef up FX pricing tools
TraderTools’ PriceOn tech enables regional banks to internalise FX flows similar to top-tier dealers
Interpolating commodity futures prices with Kriging
A futures price’s term structure is built to account for trends and seasonality effects
FX hedging dilemma vexes corporates as costs spiral
High volatility jacks up option prices, forcing firms to reconsider hedging activities
How Citi is handling topsy-turvy rates markets
Talking Heads 2022: Rate hikes and inflation have forced a rethink of the US bank’s hedging strategies
Market-making by a foreign exchange dealer
An optimal liquidity model for pricing and hedging decisions is presented
‘Repo by the minute’ could reshape lending – but not quite yet
Blockchain-based platforms from JP Morgan and Broadridge offer smart contracts that enable intraday repo
Repo haircuts and economic capital: a theory of repo pricing
The author proposes a repo haircut model that will identify capital for repo default risk as the main driver of repo spreads and allow investors to settle at an optimal combination of the haircut and repo rate.
The contractual dividend bleed
Models for dividend protected options need to compensate for valuation mismatches
Linking performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
Mutual funds struggle to value Russian bonds
Filings show just how challenging pricing securities has been during crisis
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
Pricing data is key to unlocking FX swaps e-trading
Digitec’s Stephan von Massenbach on why automation is needed for e-trading to reach its potential