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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 highest-order derivative is multiplied by a small parameter. In the case of the Black-Scholes equation, the highest-order 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 single-underlying option pricing problems (including barrier and early-exercise options), and then for multi-underlying options. Comparisons with exact solutions reveal that excellent approximations can be achieved, whilst at the same time the procedure gives added insight into the solution-space 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 12-13 March London
Join Paul and Nassim for their infamous two-day seminar. Always at the cutting edge of financial thought.

QUANTITATIVE RISK MANAGEMENT - IN THEORY AND IN PRACTICE

12-13 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 delta-alpha
  • 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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