Frontiers in Quantitative Finance
Volatility and Credit Risk Modeling
Published on 25. November 2008
Book
Hardback
300 pages
978-0-470-29292-1 (ISBN)
Description
Frontiers in Quantitative Finance
"This is a collection of papers dealing with a number of advanced issues in quantitative finance, selected among the Petit Déjeuner de la Finance talks organized by Rama Cont in Paris. It is an interesting volume for mathematical finance enthusiasts and completists."
--Damiano Brigo, Managing Director, Fitch Solutions and Visiting Professor, Mathematics, Imperial College
"Frontiers in Quantitative Finance is a collection of financial engineering research gems. Through the Petit Déjeuner de la Finance, Rama Cont has gathered authors from established and emerging leaders in the field. Their work is on the leading edge of mathematical creativity, especially with respect to credit risk modeling. I highly recommend the book!"
--Darrell Duffie, Dean Witter Distinguished Professor in Finance, Graduate School of Business, Stanford University
"This book by great contributors from markets and academia exposes cutting- edge research with great clarity."
--Bruno Dupire, recipient Risk Magazine's2008 Lifetime Achievement Award
"The Petit Déjeuner de la Finance, organized by Rama Cont, has been a successful example of interaction between academics and practitioners, and an extraordinary opportunity to share and spread knowledge on the latest advances in derivatives pricing. This book is the result of a careful selection of the most innovative presentations on volatility and credit derivatives modeling."
--Fabio Mercurio, Senior Quant Researcher, Bloomberg LP
"Rama Cont's Frontiers in Quantitative Finance is an interesting collection of papers over a broad range of subjects. There is something for everyone in it."
--Vladimir V. Piterbarg, Managing Director, Global Head of Quantitative Analytics, Barclays Capital
More details
Series
Edition
1. Auflage
Language
English
Place of publication
Chichester
United Kingdom
Publishing group
John Wiley and Sons Ltd
Target group
Professional and scholarly
Illustrations
Illustrations
Dimensions
Height: 23.2 cm
Width: 16.4 cm
Thickness: 2.7 cm
Weight
508 gr
ISBN-13
978-0-470-29292-1 (9780470292921)
Schweitzer Classification
Person
Rama Cont is Associate Professor at Columbia University and Director of the Columbia Center for Financial Engineering. He is also a founding partner of Finance Concepts, a firm offering training and consulting services in quantitative finance and risk management.
Content
Preface.
About the Editor.
About the Contributors.
PART ONE: Option Pricing and Volatility Modeling.
CHAPTER 1: A Moment Approach to Static Arbitrage (Alexandre d'Aspremont).
1.1 Introduction 3
1.2 No-Arbitrage Conditions.
1.3 Example.
1.4 Conclusion.
CHAPTER 2: On Black-Scholes Implied Volatility at Extreme Strikes (Shalom Benaim, Peter Friz, and Roger Lee).
2.1 Introduction.
2.2 The Moment Formula.
2.3 Regular Variation and the Tail-Wing Formula.
2.4 Related Results.
2.5 Applications.
2.6 CEV and SABR.
CHAPTER 3: Dynamic Properties of Smile Models (Lorenzo Bergomi).
3.1 Introduction.
3.2 Some Standard Smile Models.
3.3 A New Class of Models for Smile Dynamics.
3.4 Pricing Examples.
3.5 Conclusion.
CHAPTER 4: A Geometric Approach to the Asymptotics of Implied Volatility (Pierre Henry-Labord`ere).
4.1 Volatility Asymptotics in Stochastic Volatility Models.
4.2 Heat Kernel Expansion.
4.3 Geometry of Complex Curves and Asymptotic Volatility.
4.4 "-SABR Model and Hyperbolic Geometry.
4.5 SABR Model with ² = 0, 1.
4.6 Conclusions and Future Work.
4.7 Appendix A: Notions in Differential Geometry.
4.8 Appendix B: Laplace Integrals in Many Dimensions.
CHAPTER 5: Pricing, Hedging, and Calibration in Jump-Diffusion Models (Peter Tankov and Ekaterina Voltchkova).
5.1 Overview of Jump-Diffusion Models.
5.2 Pricing European Options via Fourier Transform.
5.3 Integro-differential Equations for Barrier and American Options.
5.4 Hedging Jump Risk.
5.5 Model Calibration.
PART TWO: Credit Risk.
CHAPTER 6: Modeling Credit Risk (L. C. G. Rogers).
6.1 What Is the Problem?
6.2 Hazard Rate Models.
6.3 Structural Models.
6.4 Some Nice Ideas.
6.5 Conclusion.
CHAPTER 7: An Overview of Factor Modeling for CDO Pricing (Jean-Paul Laurent and Areski Cousin).
7.1 Pricing of Portfolio Credit Derivatives.
7.2 Factor Models for the Pricing of CDO Tranches.
7.3 A Review of Factor Approaches to the Pricing of CDOs.
7.4 Conclusion.
CHAPTER 8: Factor Distributions Implied by Quoted CDO Spreads (Erik Schlogl and Lutz Schlogl).
8.1 Introduction.
8.2 Modeling.
8.3 Examples.
8.4 Conclusion.
8.5 Appendix: Some Useful Results on Hermite Polynomials under Linear Coordinate Transforms.
CHAPTER 9: Pricing CDOs with a Smile: The Local Correlation Model (Julien Turc and Philippe Very).
9.1 The Local Correlation Model.
9.2 Simplification under the Large Pool Assumption.
9.3 Building the Local Correlation Function without the Large Pool Assumption.
9.4 Pricing and Hedging with Local Correlation.
CHAPTER 10: Portfolio Credit Risk: Top-Down versus Bottom-Up Approaches (Kay Giesecke).
10.1 Introduction.
10.2 Portfolio Credit Models.
10.3 Information and Specification.
10.4 Default Distribution.
10.5 Calibration.
10.6 Conclusion.
CHAPTER 11: Forward Equations for Portfolio Credit Derivatives (Rama Cont and Ioana Savescu).
11.1 Portfolio Credit Derivatives.
11.2 Top-Down Models for CDO Pricing.
11.3 Effective Default Intensity.
11.4 A Forward Equation for CDO Pricing.
11.5 Recovering Forward Default Intensities from Tranche Spreads.
11.6 Conclusion.
Index.