The MathFinance Newsletter, Edition 92, February 09 2004.

Previous editions and this edition in html format can be found on http://www.mathfinancenews.com/.

In this issue:

1. MathFinance Job Exchange
   1. Senior Lecturer/Associate Professor in Financial Mathematics at University College Cork, Ireland
   2. Wissenschaftliche Mitarbeiter am Lehrstuhl für Finanzierung der Universität Mannheim
   3. Equity Derivatives Quantitative Analyst, Deutschland
   4. Wissenschaftliche/r Mitarbeiterin/Mitarbeiter am HVB-Stiftungsinstitut für Finanzmathematik,Technische Universitaet Muenchen
2. MathFinance Events
   1. Bachelier Finance Society Third World Congress
   2. "The Mathematics of Credit Derivatives" - A 2 - Day course led by Prof. Philipp Schönbucher
   3. Interest-Rate Modelling & Stochastic Volatility Workshop
   4. Basket Credit Derivatives & Synthetics CDO's Workshop
   5. Frankfurt MathFinance Workshop on Derivatives and Risk Management in Theory and Practice
   6. EURANDOM Workshop on "Exotic option pricing under advanced Lévy models"
   7. Workshop on Using Simulation Techniques for Energy Risk Management and Decision Making and Workshop on Storage: Valuation, Management and Optimisation of Storage Facilities, London
3. MathFinance Resources
1. HTML Tidy und LCC-Win32
2. The Concepts and Practice of Mathematical Finance - The new book by Mark Joshi
3. Erstellung von Folien mit LaTeX
4. Quantitative Finance Volume 4 Issue 1

• 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: Uwe Wystup, MathFinance
Assistant Editors: Susanne Griebsch, Student at Goethe-University, Frankfurt; Tino Kluge, University of Oxford; Abhishek Dutta, University of Twente
Technical Editor: Tom Heide, University of Applied Science, Frankfurt
Database Solutions: Dr. Thorsten Schmidt, Giessen University

In detail:
 
 

1. MathFinance Job Exchange
   
   

   1. Associate Professor/Senior Lecturer in Financial Mathematics
      School of Mathematics, Applied Mathematics and Statistics
      University College Cork

      The School of Mathematics, Applied Mathematics and Statistics invites applications for a full-time permanent position in Financial Mathematics. The position will be filled at either Associate Professor or Senior Lecturer level. The mathematical and computational sciences are among the major research strengths of UCC, Irelands leading research university. The candidate will be expected to enhance UCC's excellence in research and teaching in the area of financial mathematics and to have the ability to lead in the development of degree programes in this area. The level at which the appointment is made will be based on the experience and expertise of the candidate.

      Salary scales [new entrants]:

      • Associate Professor: €79,914 - €93,854 p.a.
      • Senior Lecturer: €56,216 - €79,653 p.a.
      Closing date: Wednesday, 31 March 2004.

      For further details on the post please visit: http://euclid.ucc.ie/ and http://www.ucc.ie/appointments/academic/

      Informal enquiries may be made to Dr. J.J. Grannell, Chairman, School of Mathematics, Applied Mathematics and Statistics. Email: j.grannell@ucc.ie

      Application forms must be completed and are available, with further particulars, from: http://www.ucc.ie/appointments/academic/ or
      Recruitment Office
      Department of Human Resources
      University College Cork
      Cork
      Ireland
      Tel: + 353 21 4903690
      Email: recruitment@per.ucc.ie
      Fax: + 353 21 4276995
      

      University College Cork is an Equal Opportunities Employer.

      
      
      

   2. Wissenschaftliche Mitarbeiter am Lehrstuhl für Finanzierung der Universität Mannheim

      Am Lehrstuhl für Finanzierung der Universität Mannheim ist ab sofort die Stelle eines/r

      • Wissenschaftlichen Mitarbeiters/in (BAT II a)
        

        zu besetzen. Gesucht wird ein/e Dipl.-Mathematiker/in mit wirtschaftswissenschaftlichem Schwerpunkt und Prädikatsexamen. Der Forschungsschwerpunkt des Lehrstuhls liegt im Bereich der Bewertung und Steuerung von Zins-, Kredit-, Liquiditäts- und Energierisiken. Von einem Bewerber wird ein ausgeprägtes Interesse an theoretischen und empirischen Problemen des Kapitalmarktes oder der Unternehmensfinanzierung erwartet.

        Der Tätigkeitsbereich umfasst die Mitarbeit an einem genehmigten DFG-Projekt zur Bewertung von Kredit- und Liquiditätsrisiken sowie die üblichen Aufgaben eines/r Wissenschaftlichen Mitarbeiters/in innerhalb eines netten Teams engagierter Mitarbei-ter. Mit der Stelle ist die Durchführung eines Promotionsvorhabens verbunden.

      • Wissenschaftlichen Mitarbeiters/in (BAT II a)
        

        zu besetzen. Gesucht wird ein/e Dipl.-Mathematiker/in mit wirtschaftswissenschaftlichem Schwerpunkt mit Prädikatsexamen. Der Forschungsschwerpunkt des Lehrstuhls liegt im Bereich der Bewertung und Steuerung von Zins-, Kredit-, Liquiditäts- und Energierisiken. Von einem Bewerber wird ein ausgeprägtes Interesse an theoretischen und empirischen Problemen des Kapitalmarktes und der Bankenregulierung erwartet.

        Der Tätigkeitsbereich umfasst die Mitarbeit an einem genehmigten DFG-Projekt zur Prozyklizität des Risikomanagements bei Kreditinstituten sowie die üblichen Aufga-ben eines/r Wissenschaftlichen Mitarbeiters/in innerhalb eines netten Teams engagier-ter Mitarbeiter. Mit der Stelle ist die Durchführung eines Promotionsvorhabens ver-bunden.

      Für telefonische Voranfragen steht Ihnen
      Herr Dipl.-Wi.-Ing. Christian Koziol, Tel. 06 21/1 81-15 21,
      gerne zur Verfügung.

      Ihre schriftliche Bewerbung richten Sie bitte an:
      Prof. Dr. Wolfgang Bühler
      Lehrstuhl für Finanzierung
      Universität Mannheim
      68131 Mannheim.

      
      
      

   3. Equity Derivatives Quantitative Analyst, Deutschland

      Große deutsche Bank sucht für das Financial Engineering Team im Bereich Aktienderivate einen Quantitativen Analysten.

      Zu Ihren Kernaufgaben zählen:
      
      
      • Implementierung und Entwicklung von Bewertungsmodellen für Aktienderivate und Hybride Produkte
      • Analyse von Trading- und Hedgingstrategien in enger Zusammenarbeit mit dem Handel
      • Beratung von Handel und Sales bei der Einführung neuer Produkte
      
      
      Aus unserer Sicht sind folgende Fähigkeiten Grundvoraussetzung für diese Position:
      
      
      • Diplom oder Prom. in der Mathematik oder Physik
      • Gute Kenntnisse in der Stochastischen Analysis
      • Erfahrung mit numerischen Verfahren zur Lösung von PDE's und Monte Carlo Methoden
      • Sehr gutes finanzmathematisches Know How (Option Pricing)
      • Programmierkenntnisse in C++ und VB/A
      
      
      Idealerweise verfügen Sie über
      
      
      • Kenntnisse von Smile Modellen für Aktienderivate
      • Erste Berufserfahrung und/oder interessante Praktika
      
      
      

      In einem kleinen sehr effizienten Team werden Sie schnell Verantwortung übernehmen.

      To submit your complete application, please email all documents to us

      For hardcopies, please mail your folder to
      
      Prof. Dr. Uwe Wystup
      MathFinance AG
      Camberger Strasse 12
      65529 Waldems
      Germany
      
      Deadline is 20 February 2004, please use the following reference number: J005510
      
      

   4. Wissenschaftliche/r Mitarbeiterin/Mitarbeiter am HVB-Stiftungsinstitut für Finanzmathematik,Technische Universitaet Muenchen

      Am HVB-Stiftungsinstitut für Finanzmathematik am Zentrum Mathematik der Technischen Universitaet Muenchen ist zum nächstmöglichen Zeitpunkt die Stelle einer/eines

      Wissenschaftlichen Mitarbeiterin/Mitarbeiters
      

      zu besetzen. Die Vergütung erfolgt nach BAT IIa.

      Gesucht wird ein/eine Diplom-Mathematiker(in), vorzugsweise mit Schwerpunkt im Bereich Stochastik.

      Zu den Aufgaben gehoert die Betreuung von Lehrveranstaltungen im Zentrum Mathematik sowie das wissenschaftliche Arbeiten im Bereich Finanzmathematik. Die Stelle ist auf 3 Jahre befristet. Wir bieten die Moeglichkeit der Promotion. Die Technische Universitaet Muenchen strebt die Erhoehung des Anteils von Frauen in Forschung und Lehre an und bittet deshalb Wissenschaftlerlinnen nachdruecklich um ihre Bewerbung.

      Es wird darauf hingewiesen, dass die Bewerbung geeigneter Schwerbehinderter erwuenscht ist.

      Bewerbungen senden Sie bitte mit den ueblichen Unterlagen an

      Prof. Dr. Jan Kallsen
      HVB-Stiftungsinstitut für Finanzmathematik
      
      Zentrum Mathematik
      Technische Universität München
      Boltzmannstrasse 3
      85747 Garching b. München
      
      Tel.: 0 89 / 289 17409
      
      e-mail: Kallsen@ma.tum.de
      
      
      Bewerbungsfrist ist bis April 2004.
      
      
   
   
   
2. MathFinance Events
   
   
   
   
   

   1. Bachelier Finance Society Third World Congress

      July 21-24, 2004 - Chicago
      
      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
      
      For Additional Information
      
      http://www.uic.edu/orgs/bachelier/
      bfs2004@uic.edu
      
      

   2. "The Mathematics of Credit Derivatives" - A 2 - Day course led by Prof. Philipp Schönbucher

      Course Dates: 22nd / 23rd March 2004
      Course Location: New York
      
      

      Due to three successful London based Credit Derivatives events in 2003, WBS Training are now taking one of the Europe's most popular Credit Derivatives events to the Americas in 2004.

      Who should attend?
      
      
      • Counter-party risk
      • Credit Derivatives
      • Credit Research
      • Credit Risk
      • Financial Engineering
      • Quantitative Analysis
      • Risk Management
      • Structured Finance
      • Structured Credit Products
      
      
      Course Leader: Prof. Philipp Schönbucher
      

      Prof. Philipp J. Schönbucher is assistant professor of Quantitative Risk Management at the Department of Mathematics of the Swiss Federal Institute of Technology (ETH) Zurich. He holds degrees in mathematics (Oxford) and economics (Bonn) and a PhD in economics (Bonn). His publications include papers on credit risk modelling, credit derivatives pricing, stochastic volatility modelling, option pricing in illiquid markets, real options and term structure models. His main area of research is credit risk modelling and credit derivatives pricing in which he has been active since 1996. Philipp is a consultant and professional trainer to a number of leading financial institutions. Furthermore he is author of a book on "Credit Derivatives Pricing Models" (Wiley, 2003).

      Aim of the course
      

      This course covers the latest developments in the pricing and risk management of Credit Derivatives. The first day examines state-of-the-art techniques of modelling and hedging the risks of single-name credit derivatives, whilst in the second day you will learn the most recent developments in the modelling and pricing of portfolio and basket credit risks. Each major model is illustrated with a practical case study. All cases studies use real-world data (quoted prices, CDS rates, historical default rates).

      All delegates will receive a complimentary copy of Philipp Schonbucher's "Credit Derivatives Pricing Models" Wiley May 2003.

      Pre Course Service:
      

      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.

      All attendees to WBS Training events in 2004 will automatically receive 20% discount to The Inaugural Fixed Conference Prague 2004 (see PDF Page 4 for details)

      Course Programme:
      
      Day 1: Single-Name Credit Derivatives:
      
      9:00-10:30 Credit Derivatives: Instruments and Structures
      10:30-11:00 Coffee Break
      11:00-12:30 Spread-Curves and Intensity-based Models
      12:30-14:00 Lunch Break
      14:00-15:30 Dynamics in Spread Curves
      15:30-16:00 Coffee Break
      16:00-17:30 Firm's value approaches: Hedging Credit with Shares: Does it Work?
      
      Day 2: Basket- and Portfolio Credit Derivatives
      
      9:00-9:45 Basket and Portfolio Credit Derivatives: Instruments and Structures
      9:45-10:30 Pricing Multi-Name Credit Derivatives: Static Models
      10:30-11:00 Coffee Break
      11:00-12:30 Default dependency using the Gaussian Copula: Semi-dynamic Models
      12:30-14:00 Lunch Break
      14:00-15:30 Fully Dynamic Models
      15:30-16:00 Coffee Break
      16:00-17:30 Advanced Fully Dynamic Models
      
      

      Email contact with Philipp Schonbucher for all post-course questions!

      All delegates will receive a CD-ROM (together with full course documentation) to take home with all excel spreadsheet examples from the event!

      Course fee: $2799:00

      For a detailed course programme please see: http://www.wbstraining.com/frame.php

      Event contact:
      
      Neil Fowler + 44 (0) 1273 674400
      neil@wbstraining.com
      
      
      

   3. Interest-Rate Modelling & Stochastic Volatility Workshop

      Monday 1st / Tuesday 2nd March 2004
      Central London
      

      This dynamic workshop covers two of the hot topics in financial research: Smile Modelling and Interest Rate Modelling. The two days will centre on key developments in Interest Rate Modelling, including new research on Wiener Chaos and return modelling with Levy Processes plus new research on stochastic volatility for interest rate models in various approaches (stochastic volatility, uncertain volatility and jump diffusion). The speaker faculty for this event will include some of the world's key pioneers, innovative academics and top practitioners from the fixed income arena.

      This programme features the following Interest Rate experts:

      • Philippe Balland: Director in the fixed income division Merrill Lynch, London
      • Dorje Brody: Royal Society University Research Fellow, Imperial College London
      • Dariusz Gatarek: Manager in the Capital Markets Group, Deloitte & Touche, Warsaw
      • Lane Hughston: Professor of Financial Mathematics, King's College London
      • Vladimir Piterbarg: Managing Director and co-Head of Quantitative Research, Bank of America
      • Riccardo Rebonato: Head of Group Market Risk and Quantitative Research Centre, RBOS
      • Nick Webber: Finance Lecturer, Cass Business School, City University, London
      
      
      Day 1

      9:00 - 12:30 Wiener Chaos Representations for the Practical Foundations of Interest Rate Modelling and Interest Rate Derivatives Pricing (New Research) (Morning Break 10:30 - 11:00)

      Lane Hughston: Professor of Financial Mathematics, King's College London
      Dorje Brody: Royal Society University Research Fellow, Imperial College London

      • Overview of the fundamental requirements for term structure dynamics
      • Positive interest HJM models and the volatility structure approach
      • The role of the state-price density and its interpretation as a potential
      • Conditional variance representation for the state-price density
      • Elements of Wiener chaos, introduction to the calculus of Wiener functionals
      • Wiener chaos expansion for term structure dynamics
      • First and second chaos interest rate models
      • Coherent representations for arbitrary term structure models
      • Option and Swaption pricing in second chaos models
      • Calibration and implementation of the second chaos models

      Lunch: 12:30 - 13:30

      13:30 - 15:00 A Stochastic Volatility Forward Libor Model with a Term Structure of Volatility Smiles (New Research)

      Vladimir Piterbarg: Managing Director and co-Head of Quantitative Research, Bank of America.

      • Build a Stochastic Volatility BGM model consistent with volatility smiles for the whole swaption grid
      • Introduce a Time-dependent skew in a Stochastic Volatility BGM model to account for differences in volatility smiles for swaptions of different expiries and maturities
      • Develop fast calibration methods to all market smiles
      • This new model is important for consistent pricing/hedging of the new generation of interest rate exotics such as callable range accruals, callable inverse floaters, etc. that depend on skews of swaptions with different expiries and maturities
      • Develop accurate approximations, based on homogenization methods, for European options in non-stationary local and stochastic volatility models
      
      
      

      Coffee Break 15:00 - 15:30

      15:30 - 17:30 Returns Modelling and Interest Rate Option Pricing with Levy Processes

      Dr Nick Webber: Finance Lecturer, Cass Business School, City University, London

      • Lévy processes and their properties: modelling jumps
      • Examples and applications of Lévy processes in finance and interest rate modelling
      • Smiles and Lévy processes
      • Fitting to the term structure of volatility
      • Efficient pricing methods for use with Lévy processes Monte Carlo methods and lattice methods
      • Pricing money market instruments
      
      
      

      17:30 Cocktail party

      19:00 End of day one.

      Day 2

      9:00 - 11:00 What Do we Really Need to Model Interest-Rate Smiles? (And Why Do We Want To Do It?)

      Riccardo Rebonato: Head of Group Market Risk and Quantitative Research Centre, RBOS

      • A hierarchy of smile-producing mechanisms
        • Lack of proportionality between rate changes and rate levels
        • Stochasticity of the diffusion
        • Existence of two volatility regimes
      • Empirical evidence and its relevance for modelling
      • Modelling approaches
        • CEV/Displaced Diffusions
        • Stochastic Instantaneous Volatility
        • A discrete Markov chain model
      • Comparing model results and empirical evidence
        • Eigenvectors and Eigenvalues
        • Skewness and kurtosis
        • Fitting the market smile
      • Relevance for Pricing
      
      
      

      Morning Break 11:00 - 11:30

      11:30 - 14:30 Effective Volatility Technique for Stoch-Vol BGM (Lunch 12:30 - 13:30)

      Philippe Balland: Director in the fixed income division Merrill Lynch, London.

      • Libor Market Models: framework and extensions
      • Analytic Formula when interest-rate follows CEV and mean-reverting stochastic volatility
      • Controlling joint evolution of interest-rate and volatility
      • Analytic Calibration of Libor Model to smile
      • Effect of smile on CMS and Bermudan
      
      
      

      14:30 - 15:30 Uncertain Volatility Approach for Interest Rate Modelling

      Dariusz Gatarek: Manager in the Capital Markets Group, Deloitte & Touche, Warsaw.

      • Modelling smiles for interest rate options
      • Relation to smile problem for equity/FX options - what is easier and what is more difficult
      • Local volatility versus stochastic volatility versus jump diffusions
      • Stochastic volatility for long term options - what is wrong
      • Should smiles and skews be modelled by the same framework?
      • LIBOR market model with uncertain volatility and displaced diffusion
      • Various calibrations and their implications.

      Coffee Break 15:30 - 16:00

      16:00 - 16:30 Conclusions

      Pros and cons. Which model to choose and why?

      Workshop fee £1699:00 + UK VAT

      Event contact: Neil Fowler
      Tel: + 44 (0) 1273 674400
      Fax: +44 (0) 1273 672333
      neil@wbstraining.com
      http://www.wbstraining.com

      
      
      

   4. Basket Credit Derivatives & Synthetics CDO's Workshop

      Central London 15th & 16th March 2004
      Special Offer through wilmott.com: 10% off
      

      This workshop will bring the participants up-to-date with the latest developments in the pricing and hedging methodologies used for basket and portfolio credit derivatives. The programme covers all aspects from model development and theoretical considerations over techniques for numerical implementation and risk measurement and risk-management to dynamic hedging and parameter estimation, presented by leading experts in the field. This workshop is essential to everyone trading these exciting new instruments.

      This Programme features the following Credit Risk experts:

      • Rita Laura D'Ecclesia: Associate Professor of Applied Mathematics University of Rome
      • Recai Gunesdogdu: Portfolio Strategy Group CSFB
      • Lane Hughston: Professor of Financial Mathematics King's College London
      • Richard Martin: Director, Portfolio Strategy Group CSFB
      • Lutz Schloegl: Director, Lehman Brothers
      • Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      • Robert Tompkins: Professor of Finance Hochschule für Bankwirtschaft

      All delegates who attend WBS Training Ltd workshops in 2004 will automatically receive 20% discount for The Inaugural Fixed Income Conference Prague September 2004.

      Day 1
      
      9:00 - 9:15 Introduction Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      
      09:15 10:15 Basket Credit Derivatives and Single-Tranche CDOs: Overview and Market Structure Lutz Schloegl: Director, Lehman Brothers
      
      CDS
      
      • Payoffs, payoff timing and important payoff properties
      • Typical spread dynamics: stylised facts
      • Market structure: liquidity, typical flows, where do demand and supply arise from?
      
      FtD and other Basket Credit Derivatives
      
      • Payoffs, payoff timing and important payoff properties
      • Simple price bounds
      • Market structure and liquidity
      
      Single-Tranche Synthetic CDOs
      
      • Payoffs, payoff timing and important payoff properties
      • Differences to basket credit derivatives
      • TRAC-X and IBOXX reference portfolios
      • Market structure
      
      
      10:15 - 10:30 Morning Coffee
      
      10:30 - 12:30 Mathematical overview of single-credit reduced form models Lane Hughston Professor of Financial Mathematics King's College London
      
      
      • Pricing models in general, and the role of the underlying interest rate model
      • Pricing kernel, money market account and default-free discount bonds
      
      Relation to HJM theory
      
      • The role of stopping times in the modelling of default
      • Hazard rates, and generalised Poisson processes (Cox processes)
      • Change-of-measure formulae for models involving jump sensitivity
      • On the relationship between the hazard rate in the "real" probabilitymeasure and the "pricing" measure
      • Valuation formulae for defaultable discount bonds
      • Valuation formulae for credit default swaps and other creditderivatives.
      • Corporate bonds and revolver loans
      • Elementary pricing models for single credit structures
      
      Models withdeterministic interest rates and hazard rates
      Models with "rational"hazard rates
      Case Studies
      
      12:30 - 13:30 Lunch
      
      13:30 - 14:30 Case Study: CDS Price Dynamics
      Lutz Schloegl: Director, Lehman Brothers
      
      Simple CDS pricing with spreadcurve and recovery rate
      
      • Marking-to-market of CDS positions
      • Using Bloomberg functions for CDS
      • CDS spread dynamics: What to watch out for? Jumps and volatility bursts
      
      
      14:30 - 15:30 Models for Credit Spread Dynamics and Portfolio Credit Risk: Theory Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      
      
      • Joint Diffusions
      • Affine Jump-Diffusions
      • Copula Models
      • Frailty Models
      
      
      15:30 - 15:45 Afternoon Coffee
      
      15:45 - 17:00 Portfolio Models Made Concrete: Workshop Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      
      
      • A simple specification of joint spread dynamics
      • What is the resulting joint loss distribution?
      
      Case Study: Analysing Hedge Strategies for FtD-swaps and Single-tranche CDOs
      First-to-default:
      
      • The fallacy of the cost free unwind.
      • Spread-only hedging
      • Default-only hedging
      • Combined hedging
      • Practical problems for the implementation
      
      STCDOs
      
      • Average spread risk
      • Dispersion risk
      • Can we hedge with the underlying index alone?
      
      Diversification
      
      • The advantages of risk management on a portfolio/ book -wide level.
      • How it works, does it work?
      • Can we diversify a portfolio of FtD? of Credit Derivatives? of CDO tranches?
      
      
      Cocktail Party: 17:00 - 19:00
      
      Day 2
      
      09:00 - 10:30 Innovations in Credit Portfolio Analysis: The Saddle-Point Technique Richard Martin: Director, Portfolio Strategy Group CSFB
      
      What modelling is about
      
      • Systematic & unsystematic risk, conceptually
      • Systematic risk - factor models - limiting forms of loss distribution - copulas
      • Unsystematic risk - analytics - numerics - granularity adjustment - Central Limit Thm - Saddle -point method
      • Risk measures
      • Risk contribuitions - what portfolio optimisation is - delta and gamma - mean/variance framework
      • VaR framework
      • Counterparty risk
      
      
      10:30 - 10:45 Morning Coffee
      
      10:45 - 1145 Case Study
      Recai Gunesdogdu: Portfolio Strategy Group CSFB
      
      
      • Structural default models and CUSP(tm)
      • Applications of the portfolio modelling: a case study (PortfolioRisk+)
      
      
      11:45-12:45 Tricks and Tipps for the Numerical Implementation of Portfolio Credit Risk Models
      Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      
      
      • Problems with brute/-force Monte-Carlo simulation
      • Manual convolution of the loss distribution
      • Importance sampling
      • Transform techniques (Fourier transforms and Laplace transforms)
      
      
      12:45-13:45 Lunch
      
      13:45-14:45 Workshop Numerical Implementation
      Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      
      
      • A simple first approximation for the pricing of synthetic CDOs
      • Improving with numerical convolution
      • Analysing sensitivities
      
      
      14:45-15:45 Dynamic Hedging of Basket and Portfolio Credit Derivatives
      Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
      
      
      • Sensitivities
      • Convexities
      • Spread-change risk and default arrival risk
      • Workshop: Basket credit derivatives hedging
      
      
      15:45 - 16:00 Afternoon Coffee
      
      16:00 - 17:00 Estimating Default Probabilities using the Unconditional Disturbances Approach
      Rita Laura D'Ecclesia: Associate Professor of Applied Mathematics University of Rome
      Robert Tompkins: Professor of Finance Hochschule für Bankwirtschaft
      
      An Introduction to the Unconditional Disturbances Approach
      
      • Non Parametric Estimation of Asset Price Processes
      • Simulation of Alternative Price Paths by Volatility Perturbation
      • Mixing and Re-projection of Alternative Price Paths
      
      Existing Estimation Approaches for Default Probabilities
      
      • Rating Services Approaches
      • Historical Simulations
      • Parametric Models of Default Frequency
      • Estimation of Recovery Rates
      
      A non-parametric model approach to estimate Default Probabilities
      
      • Definition of Default - Value of Assets less than Debt
      • Historical Analysis of Risky Debt by Ratings Classes
      • Asset Process of Corporate Ratings Classes
      • Debt / Equity Ratios of Pooled Corporate Issuers
      • Estimation of Frequency of Possible Default Events by Simulation
      • Estimated Default Probabilities Vs Ratings Services DP
      • Examination of Average Default Time
      • Estimation of Transition Default Probabilities
      
      Estimation of Correlation among Default Probabilities
      
      • Unconditional Disturbances for Multiple Asset Classes
      • Simulated Paths of Alternative Asset Classes
      
      Estimation of Conditional Probability and Time to Default
      
      
      Workshop fee £1699:00 + UK VAT
      
      Event contact: Neil Fowler
      Tel: + 44 (0) 1273 674400
      Fax: +44 (0) 1273 672333
      neil@wbstraining.com http://www.wbstraining.com
      
      

   5. Frankfurt MathFinance Workshop on Derivatives and Risk Management in Theory and Practice

      1st-2nd April 2004
      
      

      The workshop is intended for practitioners of the areas of trading, quantitative or derivative research and risk management as well as for academics studying or researching in the field of financial mathematics or finance in general. The talks during the three days of the workshop cover a broad range of current topics and are presented by internationally known academics and practitioners. There will be enough time for questions and discussions after each talk and additional breaks provide you the opportunity to build networks within the quantitative finance community. The workshop will be held in English.

      The HfB is organising a three day seminar Mathematik für Finanzderivate preceding the workshop (29-31 March). It focuses on the basics of financial mathematics. Please note that the seminar will be mainly held in German. Further details will be published as soon as they become available.

      List of speakers
      
      
      • Dr Ralph Bilger, d-fine GmbH
      • Dr Andreas Binder, MathConsult GmbH
      • Dr Damir Filipovic, ETH Zurich
      • Dr Jürgen Hakala, Commerzbank
      • Dr Martin Hellmich, LBBW
      • Prof Thomas Heidorn, HfB, Frankfurt
      • Prof Dieter Hess, HfB, Frankfurt
      • Dr Peter Neu, Dresdner Bank
      • Dr Thorsten Oest, d=fine GmbH
      • Prof Wolfgang Schmidt, HfB, Frankfurt
      • Prof Robert Tompkins, HfB, Frankfurt
      • Uwe Wystup, HfB/Commerzbank
      
      
      Organising committee
      
      Uwe Wystup, HfB/Commerzbank
      Tino Kluge, University of Oxford, OCIAM
      
      Sponsors
      
      This workshop is sponsored and supported by
      
      Commerzbank AG, Securities
      d-fine GmbH
      
      For more information please see http://workshop.mathfinance.de
      
      

   6. EURANDOM Workshop on "Exotic option pricing under advanced Lévy models"

      EURANDOM, Eindhoven, The Netherlands
      May 3 and 4, 2004
      
      

      In recent years more and more attention has been given to stochastic models of financial markets which depart from the traditional Black-Scholes model; that is to say both in academia and financial institutions alike. In particular focus has been placed on modelling risky assets with semi-martingales. For example Lévy process based models are able to take into account different important stylised features of financial time series. The consequence of working with more advanced stochastic models forces a number of new mathematical challenges with respect to exotic derivatives. Exotic derivatives are gaining increasing importance as financial instruments and are traded nowadays in large quantities in over the counter markets. Examples of these exotic options are lookback, barrier, Asian, Parisian, Bermudian, Russian, Israeli, Passport, Cliquet, digital, swing, corridor, Variance Swap options etc. Moreover these instruments are finding their way into other businesses like the (re-)insurance; for example catastrophe options, weather derivatives and energy derivatives are useful in handling different kinds of risk.

      Mathematical issues at stake include: multiple inverse Fourier transform techniques, issues of smooth and continuous pasting in free boundary and optimal stopping problems, extracting overshoot distributions from Wiener-Hopf factorisations, characterizing distributions of functionals of Levy processes, wavelet and other sub-basis methods for American-type option pricing, Monte-Carlo simulations and other numerical techniques.

      This workshop aims to bring people together from both industry and academia to overview recent results, discuss imminent problems and motivate new research.

      Special lectures by
      
      
      • Dilip Madan,University of Maryland at College Park
      • Peter Carr, New York University and Bloomberg
      • Marc Yor, Université Paris VI
      • Albert Shiryaev, Stekolov Mathematical Institute and Moscow State University
      
      
      Speakers and Discussion chairmen
      
      
      • Hansjörg Albrecher, Technische Universität Graz
      • Paulinne Barrieu, London School of Economics
      • Peter Carr, New York University and Bloomberg
      • Freddy Delbaen, ETH-Zentrum
      • Richard Hudson, The Wall Street Journal
      • Christoph Kühn, Johann Wolfgang Goethe-Universität
      • Andreas Kyprianou, Universiteit Utrecht
      • Elisa Nicolato,University of Aarhus
      • David Nualart, Universitat de Barcelona
      • Dilip Madan ,University of Maryland at College Park
      • Goran Peskir, University of Aarhus
      • Frédérique Petit , Université Paris VI
      • Wim Schoutens, K.U.Leuven - U.C.S.
      • Albert Shiryaev, Stekolov Mathematical Institute and Moscow State University Nick Webber, Cass Business School Marc Yor, Université Paris VI
      
      
      Registration Fee
      
      For academia there is no fee.
      
      For non-academic people the fee is
      500 Euro* (For inscriptions before 31th of March, 2004)
      700 Euro* (For inscriptions after 31th of March, 2004)
      
      http://www.eurandom.nl/workshops/2004/Exotic%20pricing/exotic_pricing.ht m
      
      

   7. Workshop on Using Simulation Techniques for Energy Risk Management and Decision Making and Workshop on Storage: Valuation, Management and Optimisation of Storage Facilities, London

      1. Workshop on Using Simulation Techniques for Energy Risk Management and Decision Making
         
         Course Date: 25 February 2004
         Location: Central London
         
         Course Presenter:

         Dr. Chris Strickland, co-author with Leslie Clewlow of “Energy Derivatives: Pricing and Risk Mangement” and founder and Director of Lacima Group.

         Aim of the Course:

         This course will provide energy professionals with the skills and knowledge to apply simulation techniques relevant to modelling energy prices and to apply those techniques for the calculating of derivative prices and risk management statistics. Application of these techniques will provide significant tools to aid the risk management decision process.

         What will be covered:
         
         
         • Underlying price processes considered
           • BS, MR, MRJD, MRJDx, Hybrid Models (joint temp-load-price)
           
           
           
         • Parameter Estimation
           • Weather variables
           • Load variables
           • Price variables
         
         
         
         • Joint temperature-load-price modelling
         • Derivative pricing
           • Multi-regional contracts
           • Multi-energy contracts
           • spark spreads
           • Weather related contracts
           • Demand sensitive contracts (retail, demand triggered, etc)
         • Implementing Value-at-risk for portfolios of traded energy contracts
         • Implementing Cashflow-at-risk (Earnings, Revenue, Profit, Gross Margin, etc) for traded and non-traded portfolios
         • Least squares techniques for valuing early exercise and path dependent contracts
         • Real Option applications
           • Generation valuation
           • Gas Storage valuation
         • Simulation and credit risk measurement
           • Exposure calculations
         
         
         
      2. Workshop on Storage: Valuation, Management and Optimisation of Storage Facilities
         
         Course Date: 26 February 2004
         Location: Central London
         
         Course Presenter:

         Dr. Chris Strickland, co-author with Leslie Clewlow of “Energy Derivatives: Pricing and Risk Mangement” and founder and Director of Lacima Group.

         Aim of the Course:

         This course will provide energy professionals with the skills and knowledge to analyse a range of storage contracts and facilities. Numerical techniques will be developed to allow valuation of storage contracts as well as providing decision making analysis for the operation of and trading related to storage opportunities.

         What will be covered:
         
         
         • Characteristics of Storage Contracts and Facilities
           • Gas Storage
           • Virtual pump storage
         • Modelling the underlying uncertainty
           • Gas price evolution
         • Trinomial Tree Building
           • Building trees consistent with the forward curve
           • Pricing derivatives in trees
           • Handling path dependency and constraints
         • Valuation of Storage Contracts
           • Intrinsic valuation
           • Binomial/trinomial forests
           • Efficient incorporation of path dependent strategy
           • Deriving the optimal strategy
         • Optimised strategies for the management of storage contracts
      
      
      Further information and registration form:
      
      http://www.lacimagroup.com/training
      
      Course Fee:
      
      EUR 1050.00
      
      Course Contact:
      
      Kate Mathews
      kate@lacimagroup.com
      
      
3. MathFinance Resources
   
   
   
   
   

   1. HTML Tidy und LCC-Win32

      • Was ist HTML Tidy?

        HTML Tidy ist ein kostenloses Programm, das HTML-Quelldateien auf syntaktische Fehler prüft, Fehler auf Wunsch automatisch korrigiert und den Code optisch zum Ausdrucken aufarbeitet.

        HTML-Tidy wurde von Dave Raggett, einem Mitarbeiter des World Wide Web Consortiums (W3C) geschrieben. Auf seiner privaten Homepage stellt er das Programm näher vor. Inzwischen hat er sein Programm der Open-Source-Gemeinde zur weiteren Entwicklung vermacht. Die offizielle Homepage findet sich nun bei Sourceforge.

        HTML Tidy wurde in plattformübergreifendem C++ geschrieben, so dass es für über 10 verschiedene Betriebssysteme verfügbar ist. Außerdem gibt es für viele Betriebssysteme grafische Oberflächen, die das Bedienen der vielen Optionen von HTML Tidy vereinfachen (unter Windows z.B. das beliebte TidyGUI). Für viele Editoren gibt es Plugins, mit denen man HTML Tidy direkt aus dem Editor starten kann (z.B. für BB-Edit). Für den HTML-Editor Phase 5 von Uli Meybohm empfehle ich das schöne deutsche Plugin von Thorsten Vitt

        Kurzer Überblick über die Leistungsfähigkeit von Tidy
        
        
        • fügt automatisch fehlende End-Tags hinzu und korrigiert falsche End-Tags
        • korrigiert die Reihenfolge schließender Tags
        • findet fehlende Klammern (>) von Tags
        • findet grobe logische Layout-Fehler
        • ersetzt auf Wunsch Darstellungs-Tags und -Attribute wie z.B. font, align durch die equivalenten CSS(Stylesheet)-Anweisungen.
        • rückt den Quellcode logisch und sauber ein, so dass er für den Programmierer besser zu handhaben ist
        • gibt zahlreiche Hinweise, wie man seine Webseite für Behinderte besser zugänglich machen kann
        
        
        http://www.sielkamp.de/~winne/tidy/index.html
        
        
      • Was ist LCC-Win32?
        
        

        LCC-Win32 ist eine kostenlose, sehr kompakte und schnelle Entwicklungsumgebung für die Programmiersprache C unter Microsoft Windows.

        LCC-Win32 wurde von dem Franzosen Jacov Navia aus dem bestehenden LCC Compiler entwickelt. Er aktualisiert LCC-Win32 ständig, die aktuelle Version ist vom 13.12.2000 (Stand 15.12.2000). Neben der Windows-Version gibt es seit 1999 auch den WEdit for Linux, eine eigenständige Applikation, die die Portierung von LCC-32 Programmen auf Linux vereinfachen soll. Die offizielle Homepage zu LCC ist http://www.cs.virginia.edu/~lcc-win32/, es gibt jedoch auch eine weitere offenbar offizielle LCC-Seite auf http://www.q-software-solutions.com/lccwin32/, die wesentlich mehr Informationen bereitstellt. Unter anderem ist dort ein englischsprachiges Tutorial zu finden, was Sie auf meinen Seiten auf deutsch lesen können.

        Die komplette Entwicklungsumgebung ist nur knapp 3MB groß, lässt sich also auch mit einem langsameren Modem bequem herunterladen. Die Dokumentation zum LCC-Compiler liegt leider nur in form von mehreren (allerdings mit Hyperlinks gespickten) Word-Dateien vor und muss extra geladen werden, sie ist etwa 2MB groß.

        Die LCC-Entwicklungsumgebung besteht aus folgenden Teilen:
        
        

        • Dem Compiler (lcc.exe) und dem Linker (lcclnk.exe). Der Compiler zeichnet sich durch extrem hohe Geschwindigkeit aus und man kann unter anderem den kompletten MMX-Befehlssatz ausschöpfen.
        • Der "Zentrale" WEdit. Es handelt sich um einen einfachen Editor mit Syntax-Highlighting und automatischer Einrückung, dem mächtige Werzeuge zur Verfügung gestellt werden. Dies sind im Einzelnen:
        • Projektverwaltung mit automatischer makefile-Erzeugung
        • Versionsverwaltung, Diff-Funktion, Patch-File Generierung
        • Statistische Tools
        • Resourceneditor zur Erstellung von Windows-Dialogen, Code-Generierung

        Fazit: Die LCC-Win32 Umgebung bietet so ziemlich alles, was eine heutige IDE anzubieten hat. Für LCC-Win32 sprechen der geringe Preis (nämlich 0), die geringe Größe und die hohe Geschwindigkeit. Nachteile von LCC sind das etwas hakelige User-Interface und natürlich der mangelnde C++-Support. Der LCC-Win32 ist ein geradezu ideales Ausbildungswerkzeug für die Programmiersprache C.

        http://www.sielkamp.de/~winne/lcc/index.html
      
      
      

   2. The Concepts and Practice of Mathematical Finance
      The new book by Mark Joshi

      For those starting out as practitioners of mathematical finance, this is an ideal introduction. It provides the reader with a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice. Strengths and weaknesses of different models, e.g. Black-Scholes, stochastic volatility, jump-diffusion and variance gamma, are examined. Both the theory and the implementation of the industry-standard LIBOR market model are considered in detail. Uniquely, the book includes extensive discussion of the ideas behind the models, and is even-handed in examining various approaches to the subject. Thus each pricing problem is solved using several methods. Worked examples and exercises, with answers, are provided in plenty, and computer projects are given for many problems. The author brings to this book a blend of practical experience and rigorous mathematical background, and supplies here the working knowledge needed to become a good quantitative analyst.

      http://markjoshi.com/concepts
      
      

   3. Erstellung von Folien mit LaTeX

      Wenn man für Vorträge, z.B. in Proseminaren oder Hauptseminaren, Folien erstellen muß, kann man mit LaTeX unter Verwendung des Paketes "seminar" gute Ergebnisse erzielen. Dazu hier ein paar nützliche Hinweise und eine Beispiel-Datei.

      http://wwwmayr.informatik.tu-muenchen.de/dienste/folien/
      
      

   4. Quantitative Finance Volume 4 Issue 1

      Table of Contents online at http://www.iop.org/EJ/toc/1469-7688/4/1
      
      
      • Approximated moment-matching dynamics for basket-options pricing - Damiano Brigo, Fabio Mercurio, Francesco Rapisarda and Rita Scotti
      
      
      
      • Value-at-Risk-efficient portfolios for a class of super- and sub-exponentially decaying assets return distributions - Y Malevergne and D Sornette
      
      
      
      • Asymmetries and tails in stock index returns: are their distributions really asymmetric? - Amado Peiró
      
      
      
      • The correlation dimension of returns with stochastic volatility - Cees Diks
      
      
      
      • ***FREE*** Understanding option prices - Ajay Khanna and Dilip B Madan
      
      
      
      • Aggregating sectors in the infectious defaults model - Ola Hammarlid
      
      
      
      • Volatility processes and volatility forecast with long memory - Gilles Zumbach
      
      
      
      • Valuing Bermudan options when asset returns are Lévy processes - Evis Këllezi and Nick Webber
      
      
      
      • The pricing of dual-expiry exotics - Peter W Buchen
      
      
      
      • A spot market model for pricing derivatives in electricity markets - Markus Burger, Bernhard Klar, Alfred Müller and Gero Schindlmayr
      
      
      Also
      
      Enhancing trend-following strategies with option selling - Jessica James and Hetty Colchester discuss the benefits of switching between strategies in periods of high and low volatility for a variety of currencies.
      • ***FREE*** On the origin of power-law tails in price fluctuations - J Doyne Farmer and Fabrizio Lillo discuss the theory presented by Gabaix et al in their recent article published in Nature and offer an alternative analysis.
      
      
      
      • ***FREE*** On the origin of power-law fluctuations in stock prices - Vasiliki Plerou, Parameswaran Gopikrishnan, Xavier Gabaix and H Eugene Stanley respond to the comments on their recent article by Farmer and Lillo.
      
      
      
      • Looking for a pattern amid the noise - Alireza Javaheri reviews, 'Nonlinear Time Series. Nonparametric and Parametric Methods' (Springer Series in Statistics) by J Fan and Q Yao
      
      
      For a limited time only Free featured articles include:
      
      
      • Trend following and option writing - a surprising portfolio - Jessica James
      
      
      
      • Bringing economics into the laboratory - Tim Chapman on Vernon L Smith
      
      
      
      • A market-induced mechanism for stock pinning - Marco Avellaneda and Michael D Lipkin
      
      
      
      • Alternative asset-price dynamics and volatility smile - Damiano Brigo, Fabio Mercurio and Giulio Sartorelli
      
      
      
      • Dependence structures for multivariate high-frequency data in finance - Wolfgang Breymann, Alexandra Dias and Paul Embrechts
      
      
      Special subscription offer
      
      

      For 2004 we are offering a special individual subscription of just £80, including full text access to the online journal. Contact lisa.trenberth@iop.org for more information.

      For further information see http://www.mathfinance.de/