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Introduction to Variance Swaps
The purpose of this article is to introduce the properties of variance swaps, and give insights into the hedging and valuation of these instruments from the particular lens of an option trader.
Tue 7 Dec 2021
Order Statistics for Value at Risk Estimation and Option Pricing
We apply order statistics to the setting of VaR estimation. Here techniques like historical and Monte Carlo simulation rely on using the k-th heaviest loss to estimate the quantile of the profit and loss distribution of a portfolio of assets. We show that when the k-th heaviest loss is used the expected quantile and its error will be independent of the portfolio composition and the return functions of the assets in the portfolio.
Tue 12 Oct 2021
A VaR-based Model for the Yield Curve
An intuitive model for the yield curve, based on the notion of value-at-risk, is presented. It leads to interest rates that hedge against potential losses incurred from holding an underlying risky security until maturity. This result is also shown to tie in directly with the Capital Asset Pricing Model via the Sharpe Ratio. The conclusion here is that the normal yield curve can be characterised by a constant Sharpe Ratio, non-dimensionalised with respect to √T, where T is the bond maturity.
Wed 15 Sep 2021
A Conditional Valuation Approach for Path-Dependent Instruments
This paper focuses on the methodology for calculating the potential future exposure of path-dependent derivative instruments.
Thu 8 Jul 2021
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'. Aaron Brown explores how in both poker and finance an individual’s strategic idiocy can be quantified and analyzed.
Thu 8 Apr 2021
The End of Growth?
In this article published by the Wilmott magazine, former banker and author, Satyajit Das, asks if this is the end of economic growth and what a world of no, or low rates of, growth will look like.
Tue 21 Apr 2020
Potential Future Exposure Calculations Using the BGM Model
Within this paper the authors look at the BGM model in PFE calculations for various exotic interest rate products.
Thu 18 Jul 2019
Risk Management: A Review
Dr. Sébastien Lleo presents CQF Institute members with his review in Risk Management.
Wed 1 Apr 2015
Anything Built By the FED, Can Also Be Destroyed
In this commentary, Edward Talisse examines the year’s bond investment, looking closely at the USA and countries in Europe including Spain, Italy and Greece.
Wed 30 Jul 2014
The Tide is High
In this article, Edward Talisse delivers another commentary on the state of the American financial markets.
Fri 11 Jul 2014
