Technical paper/Vega
Harvesting the FX skew premium
Observing the vol-of-vol parameter may reveal a skew premium in FX markets
Volatility risk structure for options depending on extrema
In this paper, the authors give a decomposition formula to calculate the vega index (sensitivity with respect to changes in volatility) for options with prices that depend on the extrema (maximum or minimum) and terminal value of the underlying stock…
Cutting Edge introduction: viva cross-vegas
Viva cross-vegas
CMS: covering all bases
CMS: covering all bases
Cutting Edge introduction: requiem for a probabilist
Requiem for a probabilist
Smooth calibration of Markov functional models for pricing exotic interest rate derivatives
The Libor market model is widely used but often criticised for its slowness. Nick Denson and Mark Joshi develop an accurate and stable calibration procedure that allows for the effective use of a control variate
Delta and vega hedging in the SABR and LMM-SABR models
Riccardo Rebonato, Andrey Pogudin and Richard White examine the hedging performance of the SABR and LMM-SABR models using real market data. As a by-product, they gain indirect evidence about how well specified the two models are. The results are…
Delta and vega hedging in the SABR and LMM-SABR models
Riccardo Rebonato, Andrey Pogudin and Richard White examine the hedging performance of the SABR and LMM-SABR models using real market data. As a by-product, they gain indirect evidence about how well specified the two models are. The results are…
Swap vega in BGM: pitfalls and alternatives
Raoul Pietersz and Antoon PelsserPractitioners who are developing the Libor BGM model for risk management of a swap-based interest rate derivative be warned: for certain volatility functions the estimate of swap vega may be poor. This may occur for time…
New products, new risks
Structured equity products marketed in Europe present considerable risk management challenges. The author shows the danger of using naive model-based approaches to price and hedge them.
Globalisation and equity index exposure
Does the global presence of large multinational companies diminish the diversification effect inequity portfolios? Gary Robinson argues that this is indeed the case, and suggests a remedy
Uncertain volatility
Market risk