Articles

Building Your Wings on the Way Down

15th October 2018 admin 0

Ray Bradbury famously defined “living at risk” as jumping off a cliff and building your wings on the way down. Too many financial risk managers who came late to the field think of risk as […]

Articles

Internal LGD Estimation in Practice

1st October 2018 admin 0

Driven by a competitive market and motivated by the new Basel Capital Accord (Basel II), banks have put a lot of effort into development and improvement of their methods to assess the  creditworthiness of their […]

Articles

Finformatics: How to Measure Really Small Things

20th August 2018 admin 0

Traders in financial assets implicitly compare the trading price to the stream of dividends the assets stand to generate. Clearly, a key determinant of value—usually the key determinant— will be the long-term drift or rate […]

Articles

A VaR-based Model for the Yield Curve

6th August 2018 Editor 0

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 […]

Articles

Pricing Rainbow Options

23rd July 2018 Editor 0

A previous paper (West 2005) tackled the issue of calculating accurate uni-, bi- and trivariate normal probabilities. This has important applications in the pricing of multiasset options, e.g. rainbow options. In this paper, we derive […]

Articles

Valuation of American Call Options

11th July 2018 Editor 0

The purpose of this paper is to provide an analytical solution for American call options assuming proportional dividends. Proportional dividends are more realistic for long-term options than absolute dividends and the formula does not have […]

Articles

Life Settlements and Viaticals

27th June 2018 Editor 0

In this chapter… • life • sex • death 1 Introduction And now for something completely. . .morbid. Life settlements and viaticals are contracts associated with death. The two expressions can be used interchangeably, although […]

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