Quantitative analysis
Britannia International
Quant Analysis
EverBank
Quant Analysis
Managing interest rate risk for non-maturity deposits
For many banks, non-maturity deposits represent a significant part of funding. However, there is still no commonly accepted approach to managing such deposits' interest rate risk. Marije Elkenbracht and Bert-Jan Nauta introduce two dynamic hedge…
Cutting edges using domain integration
Zhengyun Hu, Jeroen Kerkhof, Paul McCloud and Jorg Wackertapp present the semi-analytic lattice integrator tree, a domain integrator method for pricing derivatives. This method can eliminate almost all numerical noises in derivatives pricing, and…
Optimising omega
Optimising a portfolio's omega generally requires non-linear optimisation methods. Helmut Mausser, David Saunders and Luis Seco show that, under suitable conditions, a simple change of variables transforms the problem into a linear program that is much…
A fair-value enterprise
Cutting Edge: Liability management
ABN Amro
Quant Analysis
HSBC Bank International
Quant Analysis
Permanent TSB
Quant Analysis
Caja Espana
Quant Analysis
An indirect view from the saddle
The saddlepoint method has become established as a tool for portfolio analysis. In this article, Richard Martin and Roland Ordovas review the main concepts and show that there are two essentially distinct ways of applying it to conditional independence…
Dynamic frailties and credit portfolio modelling
Martin Delloye, Jean-David Fermanian and Mohammed Sbai estimate and discuss a reduced-form credit portfolio model in a proportional hazard framework. They propose an innovative method of generating flexible amounts of dependence between underlying…
Dealing with seller's risk
The risk of trade receivables securitisations comes from both the pool of assets and the seller of the assets. Vivien Brunel develops a model for securitisation exposures that deals with both risks, and analyses in detail the interplay between debtors'…
The price of mortality
Cutting Edge: Mortality Assumptions
BMW Personal Finance
BMW Personal Finance recently entered the UK retail market with this balance bond, in partnership with Newcastle Building Society. While this is the first such UK offering for the car manufacturer's financial division, a structured certificate has also…
ING Bank
ING Bank recently launched this DJ Eurostoxx 50-linked product in both the Netherlands and Germany. This product was offered as an alternative to Dutch investors for the similarly structured 130% Dutch Bonus Note, based on the AEX
Deutsche Bank
This product, issued by Deutsche Bank, is distributed by Citibank in Belgium. While 20 out of the 368 products recorded so far in 2006 were linked to Euribor, this product, now in its third issue, is based on a unique payoff
Bank of Ireland
Bank of Ireland's Isle of Man operation has recently celebrated its 25th anniversary on the island with the launch of the sterling-denominated Silver Anniversary Bond. The product was also made available via the Isle of Man local post offices as the…
Intensity gamma
Mark Joshi and Alan Stacey develop a new model for correlation of credit defaults based on a financially intuitive concept of business time similar to that in the variance gamma model for stock price evolution
Beyond Black-Litterman in practice
In principle, the copula-opinion pooling (COP) approach extends the Black-Litterman methodology to non-normally distributed markets and views. However, the implementations of the COP framework presented so far rely on restrictive quasi-normal assumptions…
Modelling and estimating dependent loss given default
Martin Hillebrand proposes a portfolio credit risk model with dependent loss given default (LGD), offering a reasonable economic interpretation that is easily applicable to real data. He builds a precise mathematical framework, and stresses some…
Smiling at convexity
The price of a constant maturity swap (CMS)-based derivative is largely determined by the value of swaption volatilities at extreme strikes. Fabio Mercurio and Andrea Pallavicini propose a simple procedure for stripping consistently implied volatilities…
Cracking VAR with kernels
Value-at-risk analysis has become a key measure of portfolio risk in recent years, but how can we calculate the contribution of some portfolio component? Eduardo Epperlein and Alan Smillie show how kernel estimators can be used to provide a fast,…