WILMOTT Magazine: November 2022 issue

Volume 2022, Issue 122. Pages 1-84

Every issue we bring you original material from some of the best columnists, educators and cutting-edge researchers. Subscribe here.

In this issue:

  • D. Tudball, “Contents,” Wilmott, vol. 2022, iss. 122, p. 1–1, 2022.
    [Bibtex] [Abstract]
    Contents
    @article{WILM:WILM11061,
    title = {Contents},
    author = {Tudball, Daniel},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {1--1},
    doi = {10.1002/wilm.11061},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11061},
    abstract = {Contents}
    }
  • D. Tudball, ,” Wilmott, vol. 2022, iss. 122, p. 2–3, 2022.
    [Bibtex]
    @article{WILM:WILM11062,
    title = {},
    author = {Tudball, Daniel},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {2--3},
    doi = {10.1002/wilm.11062},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11062},
    abstract = {}
    }
  • D. Tudball, “News,” Wilmott, vol. 2022, iss. 122, p. 4–5, 2022.
    [Bibtex] [Abstract]
    News
    @article{WILM:WILM11063,
    title = {News},
    author = {Tudball, Daniel},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {4--5},
    doi = {10.1002/wilm.11063},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11063},
    abstract = {News}
    }
  • A. Brown, “Get your mojo back,” Wilmott, vol. 2022, iss. 122, p. 6–10, 2022.
    [Bibtex] [Abstract]
    Revealing that opportunities in advantage gambling still exist – a new startup funded by a baseball superstar serves as illustration
    @article{WILM:WILM11064,
    title = {Get Your Mojo Back},
    author = {Brown, Aaron},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {6--10},
    doi = {10.1002/wilm.11064},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11064},
    abstract = {Revealing that opportunities in advantage gambling still exist – a new startup funded by a baseball superstar serves as illustration}
    }
  • R. Poulsen, “Descending from the ivory tower: my adventures in fintech,” Wilmott, vol. 2022, iss. 122, p. 12–14, 2022.
    [Bibtex] [Abstract]
    Dabbling in fintech with optimal mortgage choice and swap valuation as cases
    @article{WILM:WILM11065,
    title = {Descending from the Ivory Tower: My Adventures in Fintech},
    author = {Poulsen, Rolf},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {12--14},
    doi = {10.1002/wilm.11065},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11065},
    abstract = {Dabbling in fintech with optimal mortgage choice and swap valuation as cases}
    }
  • U. Wystup, “Basis madness,” Wilmott, vol. 2022, iss. 122, p. 16–18, 2022.
    [Bibtex] [Abstract]
    Three striking examples of how different theory can be from practice
    @article{WILM:WILM11066,
    title = {Basis Madness},
    author = {Wystup, Uwe},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {16--18},
    doi = {10.1002/wilm.11066},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11066},
    abstract = {Three striking examples of how different theory can be from practice}
    }
  • H. C. R. Guerard John. Xiao, “Forecasting the u.s. unemployment rate: another look,” Wilmott, vol. 2022, iss. 122, p. 20–31, 2022.
    [Bibtex] [Abstract]
    In ‘Forecasting the U.S. Unemployment Rate: Another Look’ John Guerard, Han Xiao and Rong Chen replicate and extend the MZTT analysis for the 1959 to 2019 time period. The authors report out-of-sample one-step to twelve-step ahead monthly prediction performance of various models for the 1990-2019 period, using a no-change (random walk) model as a forecasting benchmark. Results obtained from this study include: (1) weekly unemployment claims are indeed a useful and statistically significant input in a transfer function model to forecast the unemployment rate; (2) the leading economic indicators time series is a statistically significant input in a transfer function model to forecast the unemployment rate; (3) a seasonal ARIMA (SARIMA) model {outperforms} the no-change benchmark {for all forecasting horizons}; (4) the SARIMA and transfer function models are statistically significantly better forecasting models than a null, or no-change, forecast, particularly in the Global Financial Crisis (GFC), 2008-2019 time period. Improved upon MZTT, this paper provides a set of analysis that serves as an updated benchmark for comparison of forecasting methods and approaches on unemployment prediction.
    @article{WILM:WILM11067,
    title = {Forecasting the U.S. Unemployment Rate: Another Look},
    author = {Guerard, John. Xiao, Han. Chen, Rong},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {20--31},
    doi = {10.1002/wilm.11067},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11067},
    abstract = {In ‘Forecasting the U.S. Unemployment Rate: Another Look’ John Guerard, Han Xiao and Rong Chen replicate and extend the MZTT analysis for the 1959 to 2019 time period. The authors report out-of-sample one-step to twelve-step ahead monthly prediction performance of various models for the 1990-2019 period, using a no-change (random walk) model as a forecasting benchmark. Results obtained from this study include: (1) weekly unemployment claims are indeed a useful and statistically significant input in a transfer function model to forecast the unemployment rate; (2) the leading economic indicators time series is a statistically significant input in a transfer function model to forecast the unemployment rate; (3) a seasonal ARIMA (SARIMA) model {outperforms} the no-change benchmark {for all forecasting horizons}; (4) the SARIMA and transfer function models are statistically significantly better forecasting models than a null, or no-change, forecast, particularly in the Global Financial Crisis (GFC), 2008-2019 time period. Improved upon MZTT, this paper provides a set of analysis that serves as an updated benchmark for comparison of forecasting methods and approaches on unemployment prediction.}
    }
  • C. Alexander, “Generative avatar non-fungible token collections,” Wilmott, vol. 2022, iss. 122, p. 32–35, 2022.
    [Bibtex] [Abstract]
    Examines all the hype about profile picture (PFP) NFTs
    @article{WILM:WILM11068,
    title = {Generative Avatar Non-Fungible Token Collections},
    author = {Alexander, Carol},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {32--35},
    doi = {10.1002/wilm.11068},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11068},
    abstract = {Examines all the hype about profile picture (PFP) NFTs}
    }
  • S. Das, “Alice through the crypto glass part 2 – gold for nerds: the world of crypto-currencies,” Wilmott, vol. 2022, iss. 122, p. 36–41, 2022.
    [Bibtex] [Abstract]
    Despite considerable self-promotion, cryptocurrencies remain a small part of financial markets. In the second part of this series a deep look beyond the hype.
    @article{WILM:WILM11069,
    title = {Alice Through The Crypto Glass Part 2 – Gold For Nerds: The World of Crypto-currencies},
    author = {Das, Satyajit},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {36--41},
    doi = {10.1002/wilm.11069},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11069},
    abstract = {Despite considerable self-promotion, cryptocurrencies remain a small part of financial markets. In the second part of this series a deep look beyond the hype.}
    }
  • J. Andreasen, “Three strikes and you’re out,” Wilmott, vol. 2022, iss. 122, p. 42–46, 2022.
    [Bibtex] [Abstract]
    suggests a new methodology for approximating barrier option prices in stochastic local volatility models. For touch options the method only requires the input of the level, slope and curvature around the barrier in addition to the stochastic volatility parameters. Three strikes are enough.
    @article{WILM:WILM11070,
    title = {Three Strikes and You’re Out},
    author = {Andreasen, Jesper},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {42--46},
    doi = {10.1002/wilm.11070},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11070},
    abstract = {suggests a new methodology for approximating barrier option prices in stochastic local volatility models. For touch options the method only requires the input of the level, slope and curvature around the barrier in addition to the stochastic volatility parameters. Three strikes are enough.}
    }
  • G. Giller, “Two conjectures on capital placed at risk,” Wilmott, vol. 2022, iss. 122, p. 47–49, 2022.
    [Bibtex] [Abstract]
    How we decide how much of our capital to place at risk is a subject for which there is a canonical solution from academic finance, that being the work of Markowitz and Sharpe, a canonical solution from Information Theory and gaming literature, that being the Kelly Criterion, and a decided lack of fealty to either rule from practitioners.
    @article{WILM:WILM11071,
    title = {Two Conjectures on Capital Placed at Risk},
    author = {Giller, Graham},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {47--49},
    doi = {10.1002/wilm.11071},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11071},
    abstract = {How we decide how much of our capital to place at risk is a subject for which there is a canonical solution from academic finance, that being the work of Markowitz and Sharpe, a canonical solution from Information Theory and gaming literature, that being the Kelly Criterion, and a decided lack of fealty to either rule from practitioners.}
    }
  • D. Orrell, “Market impact through a quantum lens,” Wilmott, vol. 2022, iss. 122, p. 50–52, 2022.
    [Bibtex] [Abstract]
    Looking closer at three predictions made by a quantum model of the stock market.
    @article{WILM:WILM11072,
    title = {Market impact through a quantum lens},
    author = {Orrell, David},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {50--52},
    doi = {10.1002/wilm.11072},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11072},
    abstract = {Looking closer at three predictions made by a quantum model of the stock market.}
    }
  • B. Ziemba, “Superbowl 2022 and a tribute to tom brady’s career,” Wilmott, vol. 2022, iss. 122, p. 54–64, 2022.
    [Bibtex] [Abstract]
    In 2020–21, the NFL was largely a TV sport with mostly empty stadiums. Nonetheless the play was strong and Covid didn’t decimate teams.
    @article{WILM:WILM11073,
    title = {Superbowl 2022 and a tribute to Tom Brady’s career},
    author = {Ziemba, Bill},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {54--64},
    doi = {10.1002/wilm.11073},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11073},
    abstract = {In 2020–21, the NFL was largely a TV sport with mostly empty stadiums. Nonetheless the play was strong and Covid didn’t decimate teams.}
    }
  • M. Staunton, “In memory of peter carr,” Wilmott, vol. 2022, iss. 122, p. 65–67, 2022.
    [Bibtex] [Abstract]
    Demonstrates Peter den Iseger’s paper that combines Gaussian quadrature with Fast Fourier Transforms to produce Laplace Transform inversion that is extremely fast and approaching machine precision
    @article{WILM:WILM11074,
    title = {In memory of Peter Carr},
    author = {Staunton, Mike},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {65--67},
    doi = {10.1002/wilm.11074},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11074},
    abstract = {Demonstrates Peter den Iseger’s paper that combines Gaussian quadrature with Fast Fourier Transforms to produce Laplace Transform inversion that is extremely fast and approaching machine precision}
    }
  • M. Henrard, “Swap rate fallback: unreasonable effectiveness of approximations and alternatives,” Wilmott, vol. 2022, iss. 122, p. 68–74, 2022.
    [Bibtex] [Abstract]
    Observes that cash-settled swaptions with collateral discounting are impacted by the Swap Rate fallback mechanisms decided by working groups/ISDA. The legacy vanilla swaptions are becoming exotic products, as the mechanism is based on a non-linear transformation of the OIS swap rate, and generate convexity adjustments. It turns out that those two effects almost cancel each other and lead to almost vanilla products. Henrard analyses those cancelling effects and the risk management impacts. Based on those insights, Henrard proposes an adjusted fallback mechanism that reduces further the exotic features and simplifies further the risk management of the legacy book.
    @article{WILM:WILM11075,
    title = {Swap Rate fallback: unreasonable effectiveness of approximations and alternatives},
    author = {Henrard, Marc},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {68--74},
    doi = {10.1002/wilm.11075},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11075},
    abstract = {Observes that cash-settled swaptions with collateral discounting are impacted by the Swap Rate fallback mechanisms decided by working groups/ISDA. The legacy vanilla swaptions are becoming exotic products, as the mechanism is based on a non-linear transformation of the OIS swap rate, and generate convexity adjustments. It turns out that those two effects almost cancel each other and lead to almost vanilla products. Henrard analyses those cancelling effects and the risk management impacts. Based on those insights, Henrard proposes an adjusted fallback mechanism that reduces further the exotic features and simplifies further the risk management of the legacy book.}
    }
  • F. Le Floc’h, “On the bachelier implied volatility at extreme strikes,” Wilmott, vol. 2022, iss. 122, p. 76–80, 2022.
    [Bibtex] [Abstract]
    Roger Lee proved that the Black-Scholes implied variance cannot grow faster than linearly in log-moneyness. This paper investigates what happens in the Bachelier (or Normal) implied volatility world, making sure to cover the various aspects of vanilla option arbitrages.
    @article{WILM:WILM11076,
    title = {On the Bachelier implied volatility at extreme strikes},
    author = {Le Floc'h, Fabien},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {76--80},
    doi = {10.1002/wilm.11076},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11076},
    abstract = {Roger Lee proved that the Black-Scholes implied variance cannot grow faster than linearly in log-moneyness. This paper investigates what happens in the Bachelier (or Normal) implied volatility world, making sure to cover the various aspects of vanilla option arbitrages.}
    }
  • M. Radley, “Race bred/heart transplant,” Wilmott, vol. 2022, iss. 122, p. 82–83, 2022.
    [Bibtex] [Abstract]
    Porsche 911 GT3 RS and Porsche 718 Cayman GT4 RS
    @article{WILM:WILM11077,
    title = {Race Bred/Heart Transplant},
    author = {Radley, Milford},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {82--83},
    doi = {10.1002/wilm.11077},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11077},
    abstract = {Porsche 911 GT3 RS and Porsche 718 Cayman GT4 RS}
    }
  • J. Darasz, “The skewed world of jan darasz,” Wilmott, vol. 2022, iss. 122, p. 84–84, 2022.
    [Bibtex] [Abstract]
    Cartoon
    @article{WILM:WILM11078,
    title = {The Skewed World of Jan Darasz},
    author = {Darasz, Jan},
    year = 2022,
    journal = {Wilmott},
    publisher = {Wilmott Magazine, Ltd},
    volume = 2022,
    number = 122,
    pages = {84--84},
    doi = {10.1002/wilm.11078},
    issn = {1541-8286},
    url = {http://dx.doi.org/10.1002/wilm.11078},
    abstract = {Cartoon}
    }

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