Articles

Articles

Not-so-complex Logarithms in the Heston Model

5 February 2018 Editor Comments Off on Not-so-complex Logarithms in the Heston Model
In Heston’s stochastic volatility framework [Heston 1993], semi-analytical formulæ for plain vanilla option prices can be derived. Unfortunately, these formulæ require the evaluation of logarithms with complex arguments during the involved inverse Fourier integration step. […]
Articles

Six Degrees of Idiocy

22 January 2018 Editor Comments Off on Six Degrees of Idiocy
One of the classic works of poker, and risk management, is Herbert Yardley’s 1957 best-seller, The Education of a Poker Player, Including Where and How One Learns to Win. Yardley is an important transitional figure. […]
Articles

Monte Carlo Methods in Quantitative Finance Generic and Efficient MC Solver in C++ : Wilmott Magazine Article – Daniel Duffy and Joerg Kienitz

8 January 2018 Editor Comments Off on Monte Carlo Methods in Quantitative Finance Generic and Efficient MC Solver in C++ : Wilmott Magazine Article – Daniel Duffy and Joerg Kienitz
We describe how we have designed and implemented a software architecture in C++ to model one-factor and multifactor option pricing problems. We pay attention to the fact that different kinds of applications have their own […]
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Opscore Web Service

27 November 2017 Editor Comments Off on Opscore Web Service
Two decades in the market have seen ITO33 firmly establish itself as the solution provider of choice for convertible bond specialists. This gold standard is delivered via Opscore, the firm’s front-office solution for pricing, hedging, […]
Articles

American π: Piece of Cake?

13 November 2017 Editor Comments Off on American π: Piece of Cake?
An American option can be exercised by its holder at any time he wishes, not just at the expiration date. Textbooks tell you that pricing it in the context of the binomial model is a […]
Articles

Volatility: Time and Black–Scholes–Merton

23 April 2017 Editor Comments Off on Volatility: Time and Black–Scholes–Merton
The formalism of Black–Scholes–Merton knows of no such thing as the past or the future. When it models the stochastic process of the underlying asset price as Brownian motion and symbolizes its volatility by σ, […]
Articles

Automatic Differentiation for the Greeks

16 April 2017 Editor Comments Off on Automatic Differentiation for the Greeks
The sensitivities of the value of an option to the model parameters, a.k.a. “the Greeks,” are crucial to understanding the risk of an option position, as well as tasks such as model calibration. Outside a […]