Risk magazine/Technical paper
Cutting edge intro: CDOs and the risk of risk aversion
New analysis shows CDOs can withstand high levels of correlation – what they can’t cope with, though, is a sudden change in risk appetite
Expectiles behave as expected
Expectiles' results are analogous to those of value-at-risk and expected shortfall
Credit goes to forward rate spreads
Term structure of interest rates explained with a credit model
Why CDOs work
Collateralised debt obligations have largely gone under the radar since the 2007 financial meltdown, when their market collapsed. Nearly every attempt at explaining the cause of their failure pointed towards flawed assumptions in pricing models and…
Smile transformation for price prediction
Prediction of arbitrage-free option prices that outperform existing models
Portfolio construction and systematic trading with factor entropy pooling
Construction of large portfolios consistent with investors' views and stress test scenarios is a challenging task, considering the volume of information to be processed. Attilio Meucci, David Ardia and Marcello Colasante introduce a technique that…
Trading strategies via book imbalance
Predicting equity and futures tick by tick price movements
Regulatory-optimal funding
A treasury viewpoint on the funding optimization problem
Options for collateral options
Options for collateral options
The simple link from default to LGD
The simple link from default to LGD
Cutting Edge introduction: living la vida local
Living la vida local
Local correlation families
Local correlation families
Cutting Edge introduction: another FVA?
Including funding costs and benefits in derivatives prices is a controversial topic, closely tied up with the credit and debit valuation adjustments of counterparty risk. But new research suggests that, even with no default risk, differences in the…
SABR symmetry
SABR symmetry
Differential rates, differential prices
Differential rates, differential prices
Cutting Edge 2013: fixing SABR
Fixing SABR
Cutting Edge introduction: fixing FVA
The funding valuation adjustment (FVA) is the biggest controversy of recent times in quantitative finance. Now the authors of the original FVA paper are back – and think there may be a solution. Laurie Carver introduces this month’s technical articles
Funding strategies, funding costs
Funding strategies, funding costs
Time for a timer
Time for a timer
Cutting Edge introduction: systematic systematic factor models
Credit factor models tend to obscure the economics in favour of tractability – and this puts them at odds with rigorous arbitrage-free martingale pricing methods. To resolve this, quants are looking more closely at what a systematic risk factor actually…
Systematic risk factors redefined
Systematic risk factors redefined
Stuck with collateral
Stuck with collateral
Exchange-traded fund pair-trading strategies using autocorrelation-based mean reversion
ETF pair-trading strategies using autocorrelation-based mean reversion
Cutting Edge introduction: pricing the CVA doom loop
Pricing the CVA doom loop