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Quantitative analysis

The two-factor Black-Litterman model

Over the years, an increasing number of practitioners have been using the Black-Littermanmodel to make tactical asset allocation decisions. The model generates more stable resultsthan classical mean-variance optimisation and incorporates return forecasts…

Bond execution models

While research on the optimal execution of equity trading has become popular, a study of this kind has not yet been done with regard to the bond market. In this article, Koichi Miyazaki presents a bond execution model that incorporates the strong…

Pricing equity default swaps

Claudio Albanese and Oliver Chen discuss the challenges of pricing equity default swaps, a credit-equity hybrid product. These structures straddle not only traditional asset classes such as equity derivatives and credit default swaps, but also…

Loss in translation

Ben De Prisco, Ian Iscoe and Alex Kreinin introduce a new analytical approach for valuing synthetic collateralised debt obligations. The approach differs from current analytical approaches by focusing on the tranche's loss distribution directly, as…

Squaring factor copula models

Tight spreads in the credit markets have forced investors to turn to innovative structures in their search for yield. One such structure is the synthetic CDO of CDO tranches, also known as CDO2. Prasun Baheti, Roy Mashal, Marco Naldi and Lutz Schloegl…

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