In this article we apply the ADE method to a number of partial differential equations in option pricing using one-factor models (Black–Scholes, local volatility, uncertain volatility). We first give an introduction to ADE. We discuss […]
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In this article, we introduce analytic approximation formulae for FX options in the Libor market model (LMM). The method to derive the formulae is an asymptotic expansion technique introduced in Kawai [Kaw03]. We first apply […]
Even if you started out clueless about the volatility σ , given a good enough measuring stick and fast enough hands you ought to be able to measure it quickly and accurately. In practice you […]
Methods capable of forecasting the entire yield curve based on a time series extension of the Nelson-Siegel model Nelson and Siegel (1987) were suggested in the literature and compared to the non-parametric alternatives Diebold and […]
On September 19, 2006 the hedge fund Amaranth Advisors of Greenwich, Connecticut announced that it had lost $6 billion, about two thirds of the $9.25 billion fund in less than two weeks, largely because it […]
We apply order statistics to the setting of VaR estimation. Here techniques like historical and Monte Carlo simulation rely on using the k-th heaviest loss to estimate the quantile of the profit and loss distribution […]
Doyle Brunson , two-time winner of the World Series of Poker main event, has likened a poker tournament to a lottery in which more skilled players (like himself) hold more tickets than less skilled players […]
Ray Bradbury famously defined “living at risk” as jumping off a cliff and building your wings on the way down. Too many financial risk managers who came late to the field think of risk as […]
Driven by a competitive market and motivated by the new Basel Capital Accord (Basel II), banks have put a lot of effort into development and improvement of their methods to assess the creditworthiness of their […]
As I write this it is the fourth anniversary of September 11, 2001. Aside from the anniversary specials airing today, there is little in the news these days about Osama Bin Laden. The news today […]
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