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Join Adil Reghai online and explore the application and enhancement of Local Stochastic Volatility (LSV) models.

13:00 EDT / 18:00 BST / 19:00 CEST


Local Stochastic Volatility (LSV) models have been used for pricing and hedging derivatives positions for over twenty years. An enormous body of literature covers analytical and numerical techniques for calibrating the model to market data. However, the literature misses a potent approach commonly used in physics and works with absolute (dimensional) variables rather than with relative (non-dimensional) ones. While model parameters defined in absolute terms are counter-intuitive for trading desks and tend to be heavily time-dependent, relative parameters are intuitive and stable, making it easy to steer the model adequately and consistently with its Profit and Loss (PnL) explanation power. We propose a specification that first explores historical data and uses physically well-defined relative quantities to design the model. We then develop an efficient hybrid method to price derivatives under this specification. We also show how our method can be used for robust scenario generation purposes - an important risk management task vital for buy-side firms.


About the Speaker:

Adil Reghai has been working as a Quantitative Research and Development Lead at ADIA SWF since 2022. Prior to this, he served at Natixis Investment Bank starting in 2008, where he was in charge of the Quantitative Team for Equities and Commodities, focusing on derivatives pricing and Quantitative Investment Strategies (QIS) development.

Adil's educational background includes degrees from Ecole Polytechnique (X92) and Ecole des Mines (P94), Paris. His career in quantitative research also includes significant roles at Merrill Lynch, BNP Paribas, and Calyon, where he was responsible for Quantitative Research.

An active contributor to the field of mathematical finance, Adil has delivered lectures on the subject and authored numerous papers and articles. He teaches financial mathematics at SKEMA in Nice, France. Additionally, he has written several books, including "Quantitative Finance: Back to Basics," which has received a 4.8-star rating on Amazon, and "Financial Models in Production," detailing the Profit and Loss (PnL) evolution for a derivatives desk.