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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
Scenarios IV: Planning for Disasters and then Dealing with them
In the aftermath of Katrina, Bill Ziemba discusses planning for the economic and financial effects of natural disasters.
Tue 22 Jun 2021
Monte Carlo Methods in Quantitative Finance Generic and Efficient MC Solver in C++
This paper describes how the authors have designed and implemented a software architecture in C++ to model one-factor and multifactor option pricing problems.
Tue 22 Jun 2021
A Generalised Procedure for Locating the Optimal Capital Structure
This article presents a generalisation of an earlier approach for determining and locating the optimal capital structure of a corporate firm.
Thu 8 Apr 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
Not-so-Complex Logarithms in the Heston Model
In Heston’s stochastic volatility framework [Heston 1993], semi-analytical formulæ for plain vanilla option prices can be derived. Unfortunately, these formulæ require the evaluation of logarithms with complex arguments during the involved inverse Fourier integration step. In this article, a new approach is proposed to solve this problem which enables the use of Heston’s analytics for practically all levels of parameters and even maturities of many decades.
Fri 5 Mar 2021
Arbitrage-Free CMS Valuation - Watch out for the Correlations
CMS swaps (and other derivatives such as CMS caps or spread options) have become increasingly popular products in fixed-income markets. However, although a number of standard valuation formulas for CMS products exist, they very often include approximations or assumptions.
Fri 5 Mar 2021
Option Pricing and the Dirichlet Problem
Laplace’s equation is ubiquitous in physics. Yet, despite the equation’s importance in physics, it has not been important so far in finance. In this article, Joshi will relate it to options’ pricing.
Mon 8 Feb 2021
A Mathematician on Wall Street: Berkshire Hathaway
From a cigar butt to a humidor full of Havanas, courtesy of Mr Buffett with Ed Thorp.
Mon 8 Feb 2021
Stochastic Processes in Finance - Part I
This Wilmott article by Jörg Kienitz covers the key concepts of the theory of stochastic processes used in finance.
Tue 1 Dec 2020
