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Dynamic Hedging is Dead! Long Live Static Hedging!
We consider the pricing of options in a mean-variance framework in the complete absence of any dynamic (delta) hedging. We describe the concept, and how to reduce risk by static hedging only, in both stochastic volatility and jump-diffusion models, giving some results for the latter.
Mon 30 Sep 2024
Extended Credit Grades Model with Stochastic Volatility and Jumps
We present two robust extensions of the CreditGrades model: the first one assumes that the variance of returns on the firm’s assets is stochastic, and the second one assumes that the firm’s asset value process follows a double-exponential jump-diffusion.
Tue 27 Aug 2024
Grid Monte Carlo in Portfolio CVA Valuation
This article proposes and discusses an efficient numerical technique, Grid Monte Carlo (GMC), for the risk-neutral valuation of portfolio CVA.
Thu 14 Dec 2023
An Introduction to the Generalized Marginal Risk
In this paper, the authors present the concept of generalized marginal risk.
Fri 22 Sep 2023
Hedging under SABR Model
This article takes a fresh look at the delta and vega risks within the SABR stochastic volatility model Hagan et al. (2002).
Tue 21 Feb 2023
A Day in the Life of a Quantitative Portfolio Manager
CQF alumnus, Michael Althof gave a recent talk on ‘A Day in the Life of a Portfolio Manager’ – discover what he had to say about this career.
Fri 7 Oct 2022
The Chemistry of Contagious Defaults
In this article, the authors have obtained a dynamical Markovian model of default interactions that describes portfolio’s dynamics endogenously through the mechanism of chemical reactions.
Thu 1 Sep 2022
Swaptions: 1 Price, 10 Deltas, and … 61/2 Gammas*
This article compares simple risk measures (first and second order sensitivity to the underlying yield curve) for simple instruments (swaptions).
Thu 1 Sep 2022
A Markovian Model of Default Interactions: Comments and Extensions
This article analyses Davis and Lo (2001b) enhanced risk model, which is a dynamic version of the popular market model of infectious defaults of Davis and Lo (2001a).
Thu 1 Sep 2022
Forecasting the Yield Curve with S-Plus
In this paper, Dario Cziráky, shows how to implement the Nelson-Siegel and Svensson models using non-linear least squares and how to obtain standard errors and confidence intervals for the parameters, which proves to be useful in assessing the goodness-of-fit at specific points in the term structure, such as at the events of non-parallel shifts.
Fri 4 Mar 2022
