The MathFinance Newsletter, Edition 81, July 03 2003.
Previous editions and this edition in html format can be found on
http://www.mathfinancenews.com/.
In this issue:
- place a student
- recommend your book or educational institute
- find a quant
- invite to a workshop
- contribute to our website
- pose questions about mathematical finance
- introduce your research to a wider audience
The MathFinance Newsletter: Established November
1999
- supported by Landesbank Hessen-Thüringen -
Editor: Dr. Uwe Wystup, Frankfurt MathFinance Institute
Assistant Editor: Susanne Griebsch, Goethe-University, Frankfurt
Technical Editor: Tom Heide, University of Applied Science, Frankfurt
Database Solutions: Thorsten Schmidt, Giessen
University
In detail:
- MathFinance Job Exchange
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Postdoc positions at ETH Zürich
The Departement of Mathematics is looking for two
Postdocs with expertise in mathematical finance
Responsibilities:
The Department of Mathematics http://www.math.ethz.ch/ at the ETH Zürich invites applications for two Postdoc positions starting on October 1, 2003. Duties include participation in teaching for the Master of Advanced Studies in Finance program http://www.msfinance.ch/ and/or research activities in the field of mathematical finance.
Requirements:
Prerequisites are a PhD in mathematics and an excellent research record with strong links to mathematical finance.
Benefits:
We offer two positions in a very motivated, international team of experts, good salary, working conditions and infrastructure. The positions are limited to a maximum of six years; the length of the first contract will depend on previous experience and can be up to three years. The successful candidates will be part of the Financial and Insurance Mathematics Group at ETHZ http://www.math.ethz.ch/finance/.
Your Applications:
The selection process will start on July 1, 2003 and continue until the positions are filled. Contact addresses for your application are:
Prof. Freddy Delbaen
http://www.math.ethz.ch/~delbaen/,
Departement of Mathematics, ETH
Zentrum, CH-8092 Zürich
or (until September 30, 2003)
Prof. Martin Schweizer
http://www.mathematik.uni-muenchen.de/~mschweiz/WWW/hp_ms_eng.html, Mathematisches Institut,
Universität München,
D-81373 München.
In addition to your application including CV and research plan, please arrange for three letters of recommendation to be sent to one of these addresses, and send an electronic version (PDF) of your application to delbaen@math.ethz.ch and martin.schweizer@math.ethz.ch.
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Full (C4-)Professorship in Applied Mathematics
Ludwig-Maximilians-Universität München
Emphasis in mathematical stochastics, active interest in the mathematics of economics, insurance and finance.
For further details see
http://www.mathematik.uni-muenchen.de/~sekrdek/ausschrtext.html
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- MathFinance Events
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The Mathematics of Exotic Options by Prof. Robert G. Tompkins
Course Dates: 8th / 9th September 2003
Course Location: Central London
A 2 - Day course led by Prof. Robert G. Tompkins
Who should attend this course:
- Derivatives Traders
- Exotic Options Traders
- Financial Engineering
- Quantitative Analysis
- Risk Management
- Structured Finance
- Structured Credit Products
Course Leader: Prof. Robert G. TompkinsRobert Tompkins is a Professor of Finance at the Hochschule für Bankwirtschaft in Frankfurt. He is also an Honorary Professorship at the University of Warwick Business School. Dr. Tompkins was formerly the Head of International Quantitative Research at Kleinwort Benson Investment Management. Prior to this, he was the Futures and Options Specialist at Merrill Lynch, Europe and an Interest Rate Options Dealer and Currency Options Trader at two major Chicago banks. He has three degrees from the University of Chicago, including an MA in Quantitative Methods and an MBA (honours).
Robert has authored three books on Options and edited a book on exotic options "From Black Scholes to Black Holes". Robert is currently writing a series on Exotic Options, which appears in the Austrian Journal, Bank Archiv. Robert's current research interests include comparisons of established and emerging markets, volatility estimation and forecasting, implied volatility smile patterns and the hedging of exotic contingent claims.
Aim of the courseThis course covers the latest developments in the pricing and risk management of Exotic Derivatives. The first day examines state-of-the-art techniques for risk management and hedging the risks of exotic options, whilst in the second day these principles will be used to examine individual exotic option contracts. Each major type of exotic option is illustrated with a practical case study.
Course Programme:
Day 1: Option Risk Assessment, Hedging and Smiles:
9:00-10:30 Advanced Risk Analysis Of Options
10:30-11:00 Coffee Break
11:00-12:30 Discrete Option Hedging
12:30-14:00 Lunch Break
14:00-15:30 Defects In Dynamic Hedging Of Exotic Options
15:30-16:00 Coffee Break
16:00-17:30 Static Replication Of Exotic Options
Day 2: Exotic Options Hedging - Case Studies: Dynamic vs. Static Approaches
9:00-10:30 Simple Exotic Options
10:30-11:00 Coffee Break
11:00-12:30 Path Dependent Exotic Options
12:30-14:00 Lunch Break
14:00-15:30 Exotic Structered Products
15:30-16:00 Coffee Break
16:00-17:30 Options On Multiple Underlyings
More information on the content of the course can be found at:
http://www.wbstraining.com/index2.html
Contact: Neil Fowler: sales@wbstraining.com
Tel: +44 (0) 1273 674400 Fax: +44 (0) 1273 672333 -
"The Mathematics of Interest Rate Derivatives" - A 2 - Day course led by Dr. Dariusz Gatarek
Course Dates: 15th / 16th September 2003
Course Location: Central London
Who should attend?
- Interest Rate Derivatives
- Market Risk
- Risk Management
- Counter-party risk
- Financial Engineering
- Structured Finance
- Interest Rate Research
- Quantitative Analysis
- Structured Products
Pre / Post Course Service:
WBS Training use simple Pre and Post event strategies to enhance you're learning from our seminars and extend beyond the two days seminar to maximise your understanding
Pre-course Questionnaire:
Enables delegates to inform the course trainers what they specifically require from this event, equally allowing the course trainer a prior knowledge of their audience.
Pre-course Reading:
An exhaustive list of relevant papers for preparation and suggestions for future research. The reading allows delegates an incite into what the event shall actually focus on, however most importantly preparing delegates fully to maximise the event taking them to the academic point where the course material takes over.
Post- course service:
An email contact with the course trainer to answer any follow up questions that may arise after the event.
Course Leader: Dr. Dariusz Gatarek
Dr. Dariusz Gatarek is a Manager in the Capital Markets Group, in the Warsaw office. He has over 6 years of financial markets experience within the banking environment. Since joining Deloitte & Touche in 2002, Dariusz advises clients on how to manage financial risks, evaluating risk management strategies and setting hedging objectives. He is also a specialist in pricing of financial derivatives.
Aim of the course
Prior to joining Deloitte &Touche, Dariusz spent 6 years with BRE Bank during which he created equity warrants in the Polish market and then was responsible for implementing modern risk measurement methods as Value at Risk. Before joining BRE Bank Dariusz served in the Faculty of Mathematics at University of New South Wales and in Polish Academy of Science, where he still is Associate Professor.
Dariusz has published a number of papers on financial models of which perhaps his work with Alan Brace and Marek Musiela on Brace-Gatarek-Musiela (BGM) models of interest rates dynamics is the most well-known. This model is used by leading investment banks worldwide and is becoming a benchmark model of interest rate derivatives. He also contributed to analytical methods for credit risk. He holds PhD and DSc in Applied Mathematics from Polish Academy of Sciences.
For the first time WBS Training can offer a unique opportunity for investment banks to spend two days in a fully interactive seminar with one of the Founding Fathers of the now infamous BGM Model. This course covers the latest developments in the pricing and risk management of Interest Rate Derivatives. Each major model is illustrated with a practical case study. All cases studies use real-world data.
Day One
9:00-10:30 Preliminaries
10:30-11:00 Coffee Break
11:00-12:30 Heath-Jarrow-Morton model
12:30-14:00 Lunch Break
14:00-15:30 Brace-Gatarek-Musiela model
15:30-16:00 Coffee Break
16:00-17:30 Swaptions in the BGM model
Open Questions on today's seminar.
Day Two
9:00-10:30 Pricing of European products
10:30-11:00 Coffee Break
11:00-12:30 Pricing of Bermudan options
12:30-14:00 Lunch Break
14:00-15:30 LIBOR market model with stochastic volatility
15:30-16:00 Coffee Break
16:00-17:30 Single factor forward rate models
Open Questions on today's seminar.
Special Offer through mathfinance.de: 10% off or free 2 nights 5* hotel accommodation
Contact: Neil Fowler: sales@wbstraining.com
Tel: +44 (0) 1273 674400
Fax: +44 (0) 1273 672333
For more details visit: http://www.wbstraining.com -
Bachelier Finance Society Third World Congress
July 21-24, 2004 - Chicago
Call for Papers
Plenary Speakers
- Darrell Duffie
- Paul Embrechts
- Helyette Geman
- Robert Jarrow
- Masaaki Kijima
- Dilip Madan
- L.C.G. Rogers
- Martin Schweizer
Scientific/Organizing Committee
- Tomasz Bielecki
- Tomas Bjork
- Monique Jeanblanc
- Vadim Linetsky
- Eckhard Platen
Conference Organizer
Stanley R. Pliska University of Illinois at Chicago
Deadline For Submission Of Contributed Papers
January 1, 2004
For Additional Information
http://www.uic.edu/orgs/bachelier
bfs2004@uic.edu -
Asset-Backed Securities: Pricing and Hedging Aspects by Prof. Ian Giddy
Special Offer through mathfinance.de: 10% off or free 2 nights 5* hotel accommodation
Course Dates: 16th / 17th October 2003
Course Location: Central London
Who Should AttendCFOs, Treasurers and risk managers in companies which finance using asset-backed securities; investment professionals involved in managing ABS portfolios; officers in banks and other financial institutions who manage portfolios of CDOs and other asset-backed securities; dealers who trade CDOs and credit-linked notes.
Course Leader: Prof. Ian GiddyIan Giddy has taught finance at NYU, Columbia, Wharton, Chicago and in 35 countries during the past three decades. He was Director of International Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The author of more than fifty articles on international finance, he has served at the International Monetary Fund and the U.S. Treasury and has been a consultant with numerous corporations and financial institutions in the U.S. and abroad. He is the author or co-author of The International Money Market, The Handbook of International Finance, Cases in International Finance, Global Financial Markets, Asset Securitization in Asia and The Hudson River Watertrail Guide.
Pre / Post Course Service:WBS Training use simple Pre and Post event strategies to enhance your learning from our seminars and extend beyond the two days seminar to maximise your understanding
Pre-course Questionnaire: Enables delegates to inform the course trainers what they specifically require from this event, equally allowing the course trainer a prior knowledge of their audience. Pre-course Reading: The reading allows delegates an incite into what the event shall actually focus on, however most importantly preparing delegates fully to maximise the event taking them to the academic point where the course material takes over. Post- course service: An email contact with the course trainer to answer any follow up questions that may arise after the event.
Aim of the CourseThe European asset-backed securities market has provided fertile ground for financial hybridization. Originating in a number of countries and legal frameworks, ABS deals - securities backed by assets that have been separated from their originator and placed in a special-purpose company - often demand specialized pricing, risk analysis and hedging. Synthetic and unfunded asset-backed securities make this need more pressing. This workshop will explore some of these variants, and explore their components from the standpoint of quantitative analysis. Participants will get involved in the details of a number of deals and have the opportunity to work in groups on hands-on applications.
Course Programme:
Day One: Risk Analysis
9:00-10:30 Groundwork
10:30-11:00 Break
11:00-12:30 Risk Analysis of CDOs
12:30-14:00 Lunch
14:00-15:30 Rating Agency Revisionism
15:30-16:00 Break
16:00-18:00 When Things Fall Apart
Day Two: Pricing and Hedging
9:00-10:30 Capital Management
10:30-11:00 Break
11:00-12:30 Pricing and Quality of CDOs
12:30-14:00 Lunch
14:00-15:30 Price Behavior and hedging
15:30-16:00 Break
16:00-17:30 Price Behavior and Hedging (continued)
Course Fee £2295:00
More information on the content of the course can be found at:
http://www.wbstraining.com/index2.html
Contact: Neil Fowler: sales@wbstraining.com
Tel: +44 (0) 1273 674400 Fax: +44 (0) 1273 672333
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- MathFinance Resources
-
Quantitative Finance Volume 3 Issue 3 (June 2003)
- Non-constant rates and over-diffusive prices in a simple model of limit order markets - Damien Challet and Robin Stinchcombe
- Estimating GARCH models using support vector machines - Fernando Pérez-Cruz, Julio A Afonso-Rodríguez and Javier Giner
- Alternative asset-price dynamics and volatility smile - Damiano Brigo, Fabio Mercurio and Giulio Sartorelli
- A nonparametric test of the mixture-of-distributions model - Wai Mun Fong and Wesley Fabrice Lab-Sane
- Modelling of stochastic fat-tailed auto-correlated processes: an application to short-term rates - Olga Yashkir and Yuri Yashkir
- Stochastic simulations of time series within Weierstrass-Mandelbrot walks - R Kutner and F Switala
- A data and digital-contracts driven method for pricing complex derivatives - Jun Lu and Hiroshi Ohta
- Profitable technical trading rules as a source of price instability - David Goldbaum
Also
Editorial: Looking forward to the future - J Doyne Farmer reflects on his period as Joint Editor-in-Chief and outlines his vision for the future of financial economics.
Profile: Informational imperfections in theory and practice - Tim Chapman profiles Sanford J Grossman, chairman, chief executive and president, Quantitative Financial Strategies Inc; Steinberg Trustee Professor for Finance Emeritus, The Wharton School, University of Pennsylvania.
Profile: Innovation at MIT - Andrew Lo introduces MIT's Laboratory for Financial Engineering and outlines its research programmes in capital markets, risk management and financial technology.
Response: The US 2000-2002 market descent: clarification - Didier Sornette and Wei-Xing Zhou respond to the issues raised by Anders Johansen in his comment 'An alternative view' published in Quantitative Finance 3/2
Feature: Traditional investment versus absolute return programmes - Hilary Till and Joseph Eagleeye argue that the differences between the hedge-fund and traditional-investment industries arise from competing views of the key sources of investment returns.
Feature: Making money from FX volatility - As FX options become commoditized products, derivatives on the FX volatility itself, such as FVAs, have emerged allowing the expression of views on volatility without the burden of actively managing complex option portfolios. Stephane Knauf describes how the canny trader may seek to apply familiar trading strategies from other markets.
Review: Matthias Reimer discusses the 3rd Workshop on Derivatives and Risk Management in Theory and Practice which took place on 2-4 April 2003 at the Frankfurt MathFinance Institute
Also
'The world is our laboratory' Cosma Shalizi profiles the career and vision of Myron Scholes, and charts the naissance of the seminal Black-Scholes formula for financial risk management.
Book Reviews:
- Reflections on risk: Michel Dacorogna reviews 'Alternative Risk Strategies', Morton Lane (ed)
- A close look at market microstructure: Giulia Iori reviews 'An Introduction to High-Frequency Finance', M M Dacorogna, R Gencay, U Muller, R B Olsen and O V Pictet
Further details at: http://stacks.iop.org/ -
Books on Financial Mathematics by A.Melnikov
- Risk Analysis in Finance and Insurance
About the book
Development of quantitative methods based on stochastic analysis is an important achievement of modern financial mathematics. Risk Analysis in Finance and Insurance offers the first comprehensive yet accessible introduction to the ideas, methods, and techniques that have transformed risk management into a quantitative science and led to unified methods for analyzing risk in both the insurance and the finance arenas. Self-contained and full of exercises and worked examples, the book serves equally well as a text for courses in financial and actuarial mathematics and as a professional reference for financial analysts and actuaries. Ancillary electronic material will be available for download from the publisher's Web site.
Key features
- Offers the first comprehensive, interdisciplinary treatment of risk management based on modern stochastic analysis
- Presents unified methodologies applicable to both finance and insurance
- Contains simplified presentation of pricing for financial and insurance derivative securities that gives readers a quick understanding of the subject
- Discusses new and innovative ideas such as superhedging, quantile hedging, markets with constraints, and real options
- Includes exercises with hints and solutions and provides supporting materials on the publisher's Web site
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Financial Markets
Stochastic Analysis and the Pricing of Derivative Securities
Book Description
Financial mathematics is going through a period of intensive development, particularly in the area of stochastic analysis. This timely work presents a comprehensive, self-contained introduction to stochastic financial mathematics. It is based on lectures given at Moscow State University, "Stochastic Analysis in Finance", and comprises the basic methods and key results of the theory of derivative securities pricing in discrete financial markets.
The following elements: martingales, semimartingales, stochastic exponents, Itô's formula, Girsanov's theorem, and more, are used to characterize notions such as arbitrage and completeness of financial markets, fair price and hedging strategies for options, forward and futures pricing, and utility maximization. Limiting transition from a discrete to continuous model with derivation of the famous Black-Scholes formula is shown.The book contains a wide spectrum of material and can serve as a bridge to continuous models. It is suitable as a text for graduate and advanced graduate students studying economics and/or financial mathematics.
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Mathematics of Financial Obligations
Book Description
Contemporary finance and actuarial calculations have become so mathematically complex that a rigorous exposition is required for an accurate and complete presentation. This volume delivers just that. It gives a comprehensive and up-to-date methodology for financial pricing and modelling. Also included are special cases useful for practical applications.
Beyond the traditional areas of hedging and investment on complete markets (the Black-Scholes and Cox-Ross-Rubinstein models), the book includes topics that are not currently available in monograph form, such as incomplete markets, markets with constraints, imperfect forms of hedging, and the convergence of calculations in finance and insurance.
The book is geared toward specialists in finance and actuarial mathematics, practitioners in the financial and insurance business, students, and post-docs in corresponding areas of study. Readers should have a foundation in probability theory, random processes, and mathematical statistics.
http://www.crcpress.com
http://www.ams.org - Risk Analysis in Finance and Insurance
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UnRisk-when fast-paced and accurate derivatives analytics count
UnRisk Pricing Engine for Mathematica, combines a computationally optimized numerical C++ engine with Mathematica's unique computing environment.
Having linked three task-oriented front-ends (Mathematica Notebooks, Excel Workbooks and Pont&Clickable Forms) to the same computational kernel, it provides a platform, which unifies the pricing and analytics environment for trading, risk management and risk controlling.
Powered by Adaptive Integration, a breakthrough development in numerical pricing schemes, it empowers derivatives market participants to price and manage their risk with an unmatched accuracy, speed and robustness. Mathematica's high level programming environment allows modeling and valuation cycles with new structured products in a fraction of the expected time and thus allow for the exploitation of new market opportunities quickly. Utilizing Mathematica's visualization capabilities, users obtain insight into the risk of complex instruments and contract features by scenario analysis.
The UnRisk Pricing Engine covers a large variety of derivatives and structured instruments of equities, FX and interest rates with highly sophisticated contract features.
Various models for the dynamics of the underlying are implemented. Advanced calibration schemes, overcoming the intrinsically ill-conditioned nature of model calibration, identify the model parameters from market data and thus allow consistent pricing.The UnRisk consortium: MathConsult GmbH, executive company of the Industrial Mathematics Competence Center in Austria, makers of UnRisk. Uni software plus GmbH, UnRisk representative.
Web: http://www.unriskderivatives.com -
Cody's Algorithm for the normal distribution function and its inverse
The main computation evaluates near-minimax approximations derived from those in "Rational Chebyshev approximations for the error function" by W. J. Cody, Math. Comp., 1969, 631-637. This transportable program uses rational functions that theoretically approximate the normal distribution function to at least 18 significant decimal digits. The accuracy achieved depends on the arithmetic system, the compiler, the intrinsic functions, and proper selection of the machine-dependent constants.
The code in Fortran77 and in C can be found at
http://odin.mdacc.tmc.edu/anonftp/
(it's called DCDFLIB : Library of Routines for Cumulative Distribution Functions Inverses, and Other Parameters)
the code in C is available at
ftp://odin.mdacc.tmc.edu/pub/source/dcdflib.c-1.1.tar.gz
