Volume 2021, Issue 116. Pages 1-96
In this issue:
- “Contents,” Wilmott, vol. 2021, iss. 116, p. 1–1, 2021.
[Bibtex]@article {WILM:WILM10961, title = {Contents}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10961}, doi = {10.1002/wilm.10961}, pages = {1--1}, year = {2021}, } - D. Tudball, “Latch on to the affirmative,” Wilmott, vol. 2021, iss. 116, p. 2–3, 2021.
[Bibtex] [Abstract]
The circumstance can arise when rates and dividend yields are negative, something that is not an unlikely event in the present market environment.
@article {WILM:WILM10962, author = {Tudball, Dan}, title = {Latch on to the Affirmative}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10962}, doi = {10.1002/wilm.10962}, pages = {2--3}, year = {2021}, abstract = {The circumstance can arise when rates and dividend yields are negative, something that is not an unlikely event in the present market environment.}, } - “News,” Wilmott, vol. 2021, iss. 116, p. 4–9, 2021.
[Bibtex]@article {WILM:WILM10963, title = {News}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10963}, doi = {10.1002/wilm.10963}, pages = {4--9}, year = {2021}, } - RavenPack, “Developed markets sovereign bonds investing ‐ enhancing style with sentiment,” Wilmott, vol. 2021, iss. 116, p. 10–13, 2021.
[Bibtex] [Abstract]
Peter Hafez, Inna Grinis, and Alan Liu discuss how standard style factor performance can be enhanced with tilts based on real‐time sentiment analytics from RavenPack.
@article {WILM:WILM10964, author = {RavenPack}, title = {Developed Markets Sovereign Bonds Investing ‐ Enhancing Style with Sentiment}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10964}, doi = {10.1002/wilm.10964}, pages = {10--13}, year = {2021}, abstract = {Peter Hafez, Inna Grinis, and Alan Liu discuss how standard style factor performance can be enhanced with tilts based on real‐time sentiment analytics from RavenPack.}, } - I. DecisionPoint, “Do investors value agility?,” Wilmott, vol. 2021, iss. 116, p. 14–19, 2021.
[Bibtex] [Abstract]
Peter Benda asks whether significant changes in job postings trends can signal subsequent changes in stock price.
@article {WILM:WILM10965, author = {DecisionPoint, Inc}, title = {Do Investors Value Agility?}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10965}, doi = {10.1002/wilm.10965}, pages = {14--19}, year = {2021}, abstract = {Peter Benda asks whether significant changes in job postings trends can signal subsequent changes in stock price.}, } - A. Brown, “Gun control,” Wilmott, vol. 2021, iss. 116, p. 20–23, 2021.
[Bibtex] [Abstract]
The Rand Corporation finds that, of 27,900 research publications on the effectiveness of gun control, only 123 could be deemed rigorous. What does that mean?
@article {WILM:WILM10966, author = {Brown, Aaron}, title = {Gun Control}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10966}, doi = {10.1002/wilm.10966}, pages = {20--23}, year = {2021}, abstract = {The Rand Corporation finds that, of 27,900 research publications on the effectiveness of gun control, only 123 could be deemed rigorous. What does that mean?}, } - U. Wystup, “Why call prices decrease as the probability of up‐jumps increases ‐ a riddle from the world of jump‐diffusion processes,” Wilmott, vol. 2021, iss. 116, p. 24–27, 2021.
[Bibtex] [Abstract]
Anti‐intuitive behavior presented in a student's stochastic surprise of a question leads to a refreshing examination of assumptions.
@article {WILM:WILM10967, author = {Wystup, Uwe}, title = {Why Call Prices Decrease as the Probability of Up‐Jumps Increases ‐ A Riddle from the World of Jump‐Diffusion Processes}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10967}, doi = {10.1002/wilm.10967}, pages = {24--27}, year = {2021}, abstract = {Anti‐intuitive behavior presented in a student's stochastic surprise of a question leads to a refreshing examination of assumptions.}, } - R. Poulsen, “That's an oddly specific number,” Wilmott, vol. 2021, iss. 116, p. 28–29, 2021.
[Bibtex] [Abstract]
In this column, we look at numbers. More specifically, the where, what, and why of some oddly specific numbers.
@article {WILM:WILM10968, author = {Poulsen, Rolf}, title = {That's an Oddly Specific Number}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10968}, doi = {10.1002/wilm.10968}, pages = {28--29}, year = {2021}, abstract = {In this column, we look at numbers. More specifically, the where, what, and why of some oddly specific numbers.}, } - L. Andersen and M. Lake, “Fast american option pricing: the double‐boundary case,” Wilmott, vol. 2021, iss. 116, p. 30–41, 2021.
[Bibtex] [Abstract]
Leif Andersen and Mark Lake consider how to adjust integral‐based numerical techniques for American options to the special situation where the exercise region has a “double boundary.”
@article {WILM:WILM10969, author = {Andersen, Leif and Lake, Mark}, title = {Fast American Option Pricing: The Double‐Boundary Case}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10969}, doi = {10.1002/wilm.10969}, pages = {30--41}, year = {2021}, abstract = {Leif Andersen and Mark Lake consider how to adjust integral‐based numerical techniques for American options to the special situation where the exercise region has a “double boundary.”}, } - E. Ayache, “God's model vs. market models part ii: the importance of a book,” Wilmott, vol. 2021, iss. 116, p. 42–49, 2021.
[Bibtex] [Abstract]
Two fundamental concepts of Bergomi's, the trading decision and the pricing function, turn probability merely into an interpretation.
@article {WILM:WILM10970, author = {Ayache, Elie}, title = {God's Model vs. Market Models Part II: The Importance of a Book}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10970}, doi = {10.1002/wilm.10970}, pages = {42--49}, year = {2021}, abstract = {Two fundamental concepts of Bergomi's, the trading decision and the pricing function, turn probability merely into an interpretation.}, } - B. Ziemba, “A pick 6 tale,” Wilmott, vol. 2021, iss. 116, p. 50–65, 2021.
[Bibtex] [Abstract]
Looking at an interesting Pick 6 in the mud at Belmont by combining the picks of three expert handicappers.
@article {WILM:WILM10971, author = {Ziemba, Bill}, title = {A Pick 6 Tale}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10971}, doi = {10.1002/wilm.10971}, pages = {50--65}, year = {2021}, abstract = {Looking at an interesting Pick 6 in the mud at Belmont by combining the picks of three expert handicappers.}, } - S. Scoleri, M. Bianchetti, and S. Kucherenko, “Application of quasi monte carlo and global sensitivity analysis to option pricing and greeks: finite differences vs. aad,” Wilmott, vol. 2021, iss. 116, p. 66–83, 2021.
[Bibtex] [Abstract]
Quasi Monte Carlo (QMC) and Global Sensitivity Analysis (GSA) techniques are applied to pricing and hedging of representative financial instruments with increasing complexity. We compare standard Monte Carlo (MC) vs. QMC results using Sobol' low‐discrepancy sequences, different sampling strategies, and various analyses of performance. We find that QMC outperforms MC in most cases, including the highest‐dimensional simulations, showing faster and more stable convergence. Regarding greeks computation, we compare standard approaches, based on finite difference (FD) approximations, with Adjoint Algorithmic Differentiation (AAD) methods providing evidence that, when the number of greeks is small, switching from MC to QMC simulation, the FD approach can lead to the same accuracy as AAD, thanks to increased convergence rate and stability, thus saving a lot of implementation effort while keeping low computational cost. Using GSA, we are able to fully explain our findings in terms of reduced effective dimension of QMC simulation, allowed in most cases by Brownian bridge discretization or Principal Component Analysis (PCA) construction. We conclude that, beyond pricing, QMC is a very efficient technique also for computing risk measures, greeks in particular, as it allows us to reduce the computational effort of high‐dimensional Monte Carlo simulations typical of modern risk management.
@article {WILM:WILM10972, author = {Scoleri, Stefano and Bianchetti, Marco and Kucherenko, Sergei}, title = {Application of Quasi Monte Carlo and Global Sensitivity Analysis to Option Pricing and Greeks: Finite Differences vs. AAD}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10972}, doi = {10.1002/wilm.10972}, pages = {66--83}, keywords = {option pricing, greeks, Quasi Monte Carlo, Sobol' sequences, Global Sensitivity Analysis, Brownian bridge, Principal Component Analysis, Adjoint Algorithmic Differentiation}, year = {2021}, abstract = {Quasi Monte Carlo (QMC) and Global Sensitivity Analysis (GSA) techniques are applied to pricing and hedging of representative financial instruments with increasing complexity. We compare standard Monte Carlo (MC) vs. QMC results using Sobol' low‐discrepancy sequences, different sampling strategies, and various analyses of performance. We find that QMC outperforms MC in most cases, including the highest‐dimensional simulations, showing faster and more stable convergence. Regarding greeks computation, we compare standard approaches, based on finite difference (FD) approximations, with Adjoint Algorithmic Differentiation (AAD) methods providing evidence that, when the number of greeks is small, switching from MC to QMC simulation, the FD approach can lead to the same accuracy as AAD, thanks to increased convergence rate and stability, thus saving a lot of implementation effort while keeping low computational cost. Using GSA, we are able to fully explain our findings in terms of reduced effective dimension of QMC simulation, allowed in most cases by Brownian bridge discretization or Principal Component Analysis (PCA) construction. We conclude that, beyond pricing, QMC is a very efficient technique also for computing risk measures, greeks in particular, as it allows us to reduce the computational effort of high‐dimensional Monte Carlo simulations typical of modern risk management.}, } - S. Stoykov, “Pricing discretely sampled variance swaps with cap/floor under heston stochastic volatility model,” Wilmott, vol. 2021, iss. 116, p. 84–93, 2021.
[Bibtex] [Abstract]
Discretely sampled variance swaps with cap or floor are priced under the dynamics of the Heston stochastic volatility model by approximating the distribution of realized variance based on exact computation of its first and second moments. Accuracy of the proposed semi‐analytical methodology is confirmed by comparing the results with Monte Carlo simulations. The influence of Heston parameters on mean and standard deviation of realized variance, as well as on payoff of variance swap with cap and floor, is shown. The paper presents a practical methodology for accurately pricing variance or volatility swaps with cap/floor, given the parameters of the Heston stochastic volatility model.
@article {WILM:WILM10973, author = {Stoykov, Stanislav}, title = {Pricing Discretely Sampled Variance Swaps with Cap/Floor Under Heston Stochastic Volatility Model}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10973}, doi = {10.1002/wilm.10973}, pages = {84--93}, keywords = {volatility derivative, discretely sampled realized variance, option on realized vari-ance, stochastic calculus, Ito integral}, year = {2021}, abstract = {Discretely sampled variance swaps with cap or floor are priced under the dynamics of the Heston stochastic volatility model by approximating the distribution of realized variance based on exact computation of its first and second moments. Accuracy of the proposed semi‐analytical methodology is confirmed by comparing the results with Monte Carlo simulations. The influence of Heston parameters on mean and standard deviation of realized variance, as well as on payoff of variance swap with cap and floor, is shown. The paper presents a practical methodology for accurately pricing variance or volatility swaps with cap/floor, given the parameters of the Heston stochastic volatility model.}, } - M. Radley, “Cars,” Wilmott, vol. 2021, iss. 116, p. 94–95, 2021.
[Bibtex] [Abstract]
Aston Martin bolts together different models to produce one of the most expensive and exclusive roofless cars ever built.
@article {WILM:WILM10974, author = {Radley, Milford}, title = {Cars}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10974}, doi = {10.1002/wilm.10974}, pages = {94--95}, year = {2021}, abstract = {Aston Martin bolts together different models to produce one of the most expensive and exclusive roofless cars ever built.}, } - J. Darasz, “The skewed world of jan darasz,” Wilmott, vol. 2021, iss. 116, p. 96–96, 2021.
[Bibtex]@article {WILM:WILM10975, author = {Darasz, Jan}, title = {The skewed world of Jan Darasz}, journal = {Wilmott}, volume = {2021}, number = {116}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10975}, doi = {10.1002/wilm.10975}, pages = {96--96}, year = {2021}, }
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