

UnRisk: Exposure Skewness 
Andreas Binder & Michael Aichinger 

Swap 4175 between the City of Linz and BAWAG P.S.K. Is currently the subject of a trial at Vienna's commercial court. This article examines how a single instrument CVA calculation for Swap 4175 could be carried out. In such a CVA calculation, market risk and counterparty risk are coupled.



CQF Turns Eleven 
Wilmott Magazine 

As the Certificate in Quantitative Finance marks its 11th year we take a look at the history of a program that has built a reputation on delivering far beyond expectations.



Singular perturbation problems arising in mathematical finance: fluid dynamics concepts in option pricing. 
Peter W Duck  University of Manchester  Finance Focus sponsored by NAG 
16979 Views 
Singular perturbation theory is a widely used tool in a number of areas of physical applied mathematics, including fluid dynamics. The basic requirement for this technique (which will be outlined in the presentation) is for a differential system in which the highestorder derivative is multiplied by a small parameter. In the case of the BlackScholes equation, the highestorder derivative (i.e. the gamma) is multiplied by the square of the volatility. Given that numerical values of the volatility are invariably small, conditions are ripe for the use of singular perturbation methods. It is shown how these lead to trivial solutions in much of parameter space, with different regions separated by thin smoothing regions (akin to 'shear layers' in the terminology of fluid dynamics). The procedure is first described for singleunderlying option pricing problems (including barrier and earlyexercise options), and then for multiunderlying options. Comparisons with exact solutions reveal that excellent approximations can be achieved, whilst at the same time the procedure gives added insight into the solutionspace topology. Finally it is illustrated how the technique has the potential to provide the basis for effective evaluations of implied volatilities (and correlation coefficients).



Wilmott and Taleb seminar 1213 March London 
Join Paul and Nassim for their infamous twoday seminar. Always at the cutting edge of financial thought.
QUANTITATIVE RISK MANAGEMENT  IN THEORY AND IN PRACTICE
1213 March 2015, London
 What is Risk?
 What are Fat Tails?
 The idea of fragility and how to measure it
 Size and scaling
 The law of large numbers in the real world
 What is complexity?
 How to price options using different distributions
 How to simulate fat tails
 How to measure model risk
 How not to measure model risk
 Sometimes it's wrong to use probabilities
 The concept of deltaalpha
 The commonest quant mistakes
 The greeks that give you false hope
 Why calibration does not work
 The dangers of correlation
 The importance of nonlinearity
 Volatility nonsense
 What commonsense tells you about volatility, and turning that into a model
 Why simple models are often the best and why too much math can be dangerous
 A summary of what to do and where the real world is different
Last chance for a discount: £1600 + VAT
Normal Price £1,999 plus VAT
The URL for online payment is http://www.wilmott.com/seminar_wt.cfm
This course is not available online
Course notes are not available separately 











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