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Modeling Volatility and Valuing Derivatives Under Anchoring
Paul Wilmott, Daniel Duffy & Alan Lewis

We develop a complete-markets model with volatility smiles, tractability, and intuitive appeal as an anchoring or habit-formation model. Like traditional stochastic volatility models, it is invariant to a multiplicative scaling the stock price levels. The anchoring effect is that the volatility depends on the relative value of the current stock price compared to its past history, with an exponential weighting.

Click here for free access to this and more exclusive content from the September Issue of Wilmott Magazine.

Low Strike Extrapolation for SABR - d-fine
Sebastian Schlenkrich, André Miemiec, Tilman Wolff-Siemssen, d-fine GmbH, Frankfurt, Germany

In this paper we analyse the modelling of rate options in a low interest rate market environment. In particular, the pricing of low, zero and negative strike vanilla options is considered. We review the modelling approaches available in the literature. For the important special case of the widely used SABR formula we illustrate the shortcomings connected with the low strike wing of the smile.

Moreover, a simple approach of low strike extrapolation will be presented. It is based on gluing the density function implied by the standard SABR formula to a suitable density function at low strikes in an arbitrage free manner. This approach yields a robust and transparent method to price low, zero and negative strike vanilla options.

From Manchester to Microsoft: Wilmott Magazine Article
Mike Staunton 3042 Views

Second in a series on the implementation of valuation models and how to avoid insanity.

alphascope - 3-5 February 2015 - Geneva - 10% Wilmott Discount
αlphascope

3-5 February 2015, InterContinental, Geneva
http://www.alphascope-event.com/FKN2448WMW

10% Discount for Wilmott members - quote VIP code FKN2448WMW

alphascope is the event to discuss new quantitative investment management and asset allocation strategies for institutional investors, allocators, asset managers, traders & banks, catering for all levels of technicality.

Uniting the latest research and business best-practise in quantitative and systematic investment with engaged networking and mind-opening guest speakers, this is the only event of its kind to combine a scientific approach to research and innovation with engaged networking between end investors and investment managers.

Fantastic names already confirmed on the line-up!

Over 70 expert speakers have already been confirmed on the αlphascope agenda, including top investors and allocators from GROSVENOR ESTATE, AP3, PGGM, DEUTSCHE BANK, EIM, ABN AMRO PRIVATE BANK, NBAD, KI CAPITAL, ABERDEEN ASSET MANAGEMENTS and more. You?ll also have the chance to hear from exciting guest speakers including:

- Didier Sornette, Professor, ETH ZURICH
- Maneet Ahuja, Presenter, CNBC & Author of ?The Alpha Masters?
- Major General Jonathan Shaw CB CBE, Former Assistant Chief Of Defence Staff, UK MOD
- Dilip Madan, Professor Of Mathematical Finance, UNIVERSITY OF MARYLAND

The most comprehensive agenda of its kind!

Benefit from the latest quantitative research in investment and asset allocation methodologies. Topics on the αlphascope agenda include CTAs & Systematic Investment, Alternative Beta & Risk-Based Approaches, High Frequency Trading, Global Macro, Relative Value Investments, Long-Short Equity Strategies, Data Mining, Volatility Strategies, Innovations In Fixed Income and more!

Create connections with Engaged Conversations and networking!

'Engaged Conversations' is a programme of informal, peer-to-peer sessions planned to give you practical solutions, engaged involvement and an interactive experience. Don?t miss your chance to partake in:
Investor/Manager Speed Networking = business cards at the ready ? meet up to 12 contacts in 20 minutes

Portfolio Manager & Technology Showcases - present your investment or technology solution to our audience as well as a panel of judges

Too Hot To Touch - with a ban on reporting anything that is mentioned inside, these sessions enable a frank and honest discussion between attendees and speakers
Strategy-Themed Networking Roundtables - sign up on the day to sit at the table of your choice, giving you the opportunity to ask your questions and networking with a top speaker

One-To-One Meetings - if you have a specific group of clients who you want to reach out to at αlphascope, why not let us coordinate a series of meetings for you at the event. This service is aimed at asset managers, who can get more information from Rustum Bharucha at
Myαlphascope Networking Portal & App - view the delegate list, set up meetings and plan your agenda

Optional Ski Day - Once the hard work is done, come relax with αlphascope on the snowy peaks of the Alps. Cement connections formed during the event and relax into the weekend

Visit the αlphascope website now for details of the 2015 programme and speaker list to date: http://www.alphascope-event.com/FKN2448WMW

For more information or to register please contact the ICBI team on +44 (0) 20 7017 7200, info@icbi.co.uk or visit the website here: http://www.alphascope-event.com/FKN2448WMW

You can get a 10% discount with the VIP code FKN2448WMW rbharucha@icbi.co.uk
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