The MathFinance Newsletter, Edition 97, May 10 2004.
Previous editions and this edition in html format can be found on
http://www.mathfinancenews.com/.
In this issue:
- MathFinance Job Exchange
- MathFinance Events
- Bachelier Finance Society Third World Congress
- Capital Structure Arbitrage Workshop, London
- Brockhaus & Jaeckel Workshop: The Practicalities of Equities Modelling
- The Inaugural Fixed Income Conference, Prague
- Basket Credit Derivatives & Synthetics CDOs Workshop
- Securitisation Structuring and Modelling Workshop
- Hot Business. UnRisk2. When accurate derivatives analytics counts.
- MathFinance Resources
- 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, Goethe-University, Frankfurt; Abhishek Dutta, University of Twente
Technical Editor: Tom Heide, University of Applied Science, Frankfurt
Database Solutions: Dr. Thorsten Schmidt, Leipzig University
In detail:
- MathFinance Job Exchange
-
Mathematiker, Physiker oder Wirtschaftsinformatiker: d-fine GmbH, Frankfurt
Bridge Over Troubled Water (Simon & Garfunkel, 1970)
Qualität trägt!
Die Wirtschaft, insbesondere in Deutschland, steckt weiterhin in der hartnäckigsten Krise der Nachkriegszeit. Doch während viele Consulting-Unternehmen massiv Personal abbauen oder gar ganz verschwinden, steigt die Nachfrage nach der hoch qualitativen Dienstleistung von d-fine. d-fine ist mit über einhundert Beratern eines der größten auf die Finanzwelt spezialisierten Beratungsunternehmen in Europa. Wir fokussieren höchste naturwissenschaftlich-technische Kompetenz auf die anspruchsvollen Herausforderungen unserer Kunden.
Wir beraten Banken, Versicherungen und Industrieunternehmen beim Aufbau ihrer Handels- und Risikomanagementsysteme - von der ersten Idee bis zur professionellen Implementierung der Lösung, vom finanzmathematischen Modell bis zur real-time Schnittstelle, vom einfachen Kredit bis zum exotischen Derivat, vom Ratingsystem bis zur Portfoliosteuerung, von IAS 39 bis Basel II.
Unsere Kunden schätzen unseren kompromisslos hohen Qualitätsanspruch und vor allem, dass wir diesen Anspruch auch realisieren. Das beginnt schon bei der Auswahl unserer Mitarbeiter: Wir suchen Sie als Mathematiker, Physiker oder Wirtschaftsinformatiker. Sie besitzen einen exzellenten Hochschulabschluss, sprechen fließend Englisch und haben überdurchschnittliche IT- sowie Programmierkenntnisse. Idealerweise sind Sie darüber hinaus mit Statistik, Numerik und Finanzmathematik vertraut und beherrschen Simulationsmethoden wie beispielsweise Monte Carlo.
Unbedingt erwarten wir von Ihnen analytisches Denken, ergebnisorientiertes Vorgehen und exzellente Kommunikationsfähigkeiten. Sie sind teamfähig, erfassen auch sehr komplexe Aufgaben schnell und können sich rasch in neue IT-Umgebungen einarbeiten. Sie haben Beratungstalent, hohe Einsatzfreude und sind flexibel und belastbar.
Selbstverständlich bieten wir Ihnen eine intensive Einführung in Ihr zukünftiges Aufgabenfeld sowie ein anspruchsvolles finanzmathematisches Training auf höchstem Niveau in Zusammenarbeit mit führenden internationalen Universitäten.
Wenn Sie in einem Team hoch begabter und hoch motivierter Kollegen mitarbeiten wollen, große individuelle Freiräume, viel Eigenverantwortung sowie hervorragende Entwicklungsperspektiven suchen, freut sich Frau Peggy Schäl auf Ihre Bewerbung. Willkommen im d-fine Team!
d-fine GmbH
Opernplatz 2
60313 Frankfurt am Main
Telefon +49-69-90737-0
http://www.d-fine.de
-
- MathFinance Events
-
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 -
Capital Structure Arbitrage Workshop, London
In conjunction with Value Consultants Ltd
Central London 10th & 11th May 2004
Topics Covered
- Fundamental models of corporate structure
- Trading opportunities suggested by these models
- Equity derivatives in capital structure arbitrage
- Credit derivatives in capital structure arbitrage
- Cross market opportunities and pitfalls
- Detailed examples and case studies
Aim of the course
Capital Structure Arbitrage is one of the most exciting areas in contemporary capital markets. To exploit these opportunities, a good understanding is needed of equity derivatives, credit derivatives, and their relationship via a model of corporate structure. This course provides a practical introduction to this rewarding type of arbitrage trading, delivered by experienced and well qualified market professionals in a highly interactive and practical manner. The course is aimed at traders, analysts, fund managers, fund of fund managers and senior management involved in proprietary risk taking in this area. Regulators and other professionals having oversight of this type of activity will also benefit considerably. The course will consist of lectures, practical demonstrations and hands on workshops in this new and exciting trading area.
Course trainers:
Dr. David Murphy is another skilled member of the Value team. He specialises in integrated strategy and solutions for risk businesses and the valuation and risk management of derivatives products. He has had extensive experience in both credit derivatives/alternative risk transfer and equity derivatives, with a variety of roles in major global investment banks. His last position before joining Value was as Chief Operating Officer for the Reinsurance Group within Merrill Lynch after moving into Debt Markets from Merrill's Global Equity Derivatives Group. David's interests in the management of risk extend to regulatory capital, and he has been influential representing the industry in the recent revisions to the Basel Capital Accord. Dr. Murphy graduated from Oxford University with an MA in Physics, and an MSc in Computation. He holds a PhD in theoretical computer science, and was a Research Fellow for some years before entering the city, working at a range of Universities including Stanford, Sydney, Rome, Glasgow and Sussex.
Andrew Street is the Managing Director of Value Consultants Ltd (VC Ltd), a trading, risk management and regulation consultancy. He has worked in the Banking and Securities industry for almost two decades. Andrew was formerly Executive Director - Head of Arbitrage and prior to that, Director - Head of Equity and Commodity Derivatives at Mitsubishi Finance Intl (Bank of Tokyo-Mitsubishi). Before moving to Mitsubishi he was Head of Equity Derivative Trading at Nomura International and Senior Equity Derivatives Trader at Paribas Capital Markets (BNP-Paribas). Andrew began his career in the City in the mid 1980's as a fixed income quantitative analyst and structured products specialist at Barings (ING-Barings). In addition to his extensive market experience Andrew was a senior financial regulator, acting as Head of Traded Risk at the Financial Services Authority (FSA) and Assistant Director - Head of Market Risk at the Securities and Futures Authority (SFA). This has provided him with a unique insight in to the control, regulation and modelling of financial risk across the whole spectrum of financial institutions internationally. Andrew has also authored a number of articles and books on mathematical and structured finance including contributions to 'Over The Rainbow' (Risk Magazine) and 'The Handbook Of Risk Management' (Wiley). He is also a member of the advisory council to New York University Courant Institute Masters Program in Mathematics in Finance. He holds advanced degrees in theoretical physics from the Universities of Durham and Oxford.
Course Outline
-
Key Ideas in Capital Structure Arbitrage
- Basic Concepts
- The Merton model of corporate structure
- The Mechanics of the Model
- Consequences for Trading
- Implementations of the Merton Model
- Other Approaches
- Understanding Equity Derivatives and Convertible Bond Structures
- Single stock options
- Using the Volatility Smile
- Dividend Risk and Stock Borrow
- Basket Options and Correlation
- Convertible Bonds, Convertible Asset Swaps and CB Options
- Convertible Arbitrage
- Credit Derivatives in Capital Structure Arb
- Practical Credit Derivatives
- Asset Swaps, Total Return Swaps, and The Role of Funding
- Credit Events and Documentation Issues
- Tranche Products and the Uses of Equity Tranches
- Understanding Market Drivers
- Pricing Credit Derivatives
- Credit Spreads, Default Probabilities and Recoveries. Pitfalls in Pricing Default Swaps
- Credit Spread Migration Models and Pricing Credit Spread Options
- Models of Corporate Structure and Inferred Pricing
- Cross Market Arbitrage
- Why might an Arbitrage Exist?
- Real World Problems: Understanding them and Avoiding them
- Executing Successful Transactions
- Risk Monitoring and the Causes of P/L Volatility
- Typical Transactions in Detail
Workshop fee £1950:00 + UK VAT
Event contact: Neil Fowler
Event Web link: http://www.wbstraining.com/index.php?m=WORKSHOPS&p=courses/csa.php
Tel: + 44 (0) 1273 674400
Fax: +44 (0) 1273 672333
neil@wbstraining.com
-
Brockhaus & Jaeckel Workshop: The Practicalities of Equities Modelling
Central London
13th / 14th May 2004
Aim of Course
Practical Equity Derivatives Modelling has to bridge the gap between scientific research and pragmatic solutions for the trading floor. In order for a smile model to be successful in a competitive environment the quantitative researcher has to present practical tools for trading, risk management and structuring desks.
This event is focussing on practical topics such as:
- Incorporation of smile models for risk management of exotic equity derivatives portfolios
- Efficient management of continuous features such as barriers and lookbacks
- Understanding and managing market and model risk of cliquet products
- There will be an emphasis on the latest developments in the equity derivatives market featuring
- Hedging complex volatility and correlation products
- Successful trading equity against credit
- New models for risky equity, local and stochastic volatility mixture and cliquets
Workshop Trainers:
Dr. Peter Jäckel received his DPhil from Oxford University in 1995. He started his career in quantitative analysis and financial modelling in 1997, when he joined Nikko Securities. Following that he worked with Riccardo Rebonato in the Quantitative Research Centre of the enlarged Royal Bank of Scotland Group where his primary responsibilities were independent model validation and derivatives modelling research. In December 2000, he joined Commerzbank Securities as a quant in their front office product development and derivatives modelling unit (Financial Engineering). Since May 2003 he has been global co-head of the team. Peter Jäckel is the author of the book "Monte Carlo methods in finance" published by John Wiley's in March 2002.
Oliver Brockhaus has more than six years experience in quantitative modelling of Equity Derivatives. He is responsible for Credit modelling at Bayerische Hypo- und Vereinsbank (HVB). Prior to joining HVB he was Senior Quantitative Researcher in the Equity Derivatives Research groups of Deutsche Bank (1997-2000) and JP Morgan Chase (2000-2003) in London. He holds a doctorate in mathematics from the University of Bonn (Prof. H. Foellmer) and a Diploma (DEA) in probability from the University P. et M. Curie in Paris (Prof. M. Yor). He is co-author of the RISK books Modelling and hedging equity derivatives (1999) and Equity derivatives and market risk models (2000).
Who should attend?
The course is aimed at the following audience:
- Quantitative Analysts
- Trader
- Structured Products
- Financial Engineering
- Risk manager
- Research
with exposure to:
- Equity derivatives
- Credit derivatives
- Credit-Equity hybrids
- Foreign exchange derivatives
- Multi factor products Research
and an interest in:
- Monte Carlo simulation
Day 1
9.00-9.15 Introduction
9.15-10.00 Equity Dynamics
- Implied Volatility Dynamics
- Sticky Strike versus Sticky Delta
- Hedging and Incomplete Markets
10.00 -10.30 Case Study: Marking to market with Smile Models
10:30 - 10:45 Morning Coffee
10.45-11.45 Forward Starting Options
- Forward Volatility versus Spot Volatility
- Level, skew and convexity relationships
- Understanding vol of vol
- Models and Forward Skew Propagation
11.45 -12.15 Case Study: Pricing and Risk Management of Cliquet Products: Napoleon
12:15 - 13:30 Lunch
13.30 -14.45 Implied Distribution
- Volatility Parameterisations
- No Arbitrage Conditions
- Interpolation and Extrapolation
- Efficient Monte Carlo Methods
- Efficient Tree Methods
14:45 - 15:00 Afternoon Coffee
15.00 -16.00 Fast Skew Models
- Analytical Local Volatility Models
- Stochastic Volatility Models with Jumps
- Mixture Models (LV and SV)
- Levy Processes
- Generalisations: Time dependent parameters, exotic payoffs
16.00 -17.00 American Monte Carlo
- Markov Chain
- Regression
- Simulated Tree
- Stochastic Mesh
- Upper and Lower Bounds
- Bermudan Style Options
17:00 - 19:00 Cocktail Party
Day 2
9.00 -9.45 American Options and Volatility Smile
- The replication method
- The rationale behind it
- The exercise boundary
- Smoothing the boundary and increasing convergence
10.00 -11.00 Stochastic Volatility Models
- Why stochastic volatility?
- What stochastic volatility?
- One model for all applications?
- A stochastic skew model
- Mathematical features of stochastic volatility models
- Monte Carlo methods and stochastic volatility models
- Finite differencing methods and stochastic volatility models
11:00 - 11:15 Morning Coffee
11.15 -12.00 Greeks with Monte Carlo
- Finite differencing with path recycling
- Finite differencing importance sampling
- Pathwise differentiation
- The likelihood ratio method
- Including a skew
12.00 -13.00 Continuous Barriers
- Review of continuous versus discrete monitoring
- Finite differencing methods
- Copula based approximations
- The Broadie-Glassermann-Kou approximation
- The BGK approximation near the barrier: a conundrum
13:00 - 14:00 Lunch
14.00 -14.45 Volatility Products
- Products: Variance, Corridor Variance, Volatility, Covariance, Correlation Swaps
- Pricing and Risk Management Techniques Effect of Volatility Dynamics
14:45 - 15:00 Afternoon Coffee
15.00 -16.00 Equity and Credit
- Risky Equity Models
- Equity Default Swaps versus Credit Default Swaps
- Convertible Bonds and Credit
16.00 -17.00 Correlation Modelling
- Hedging Correlation
- Copulas for Equities
- Understanding Correlation Risk
Workshop fee: £1699:00
Event contact: Neil Fowler
Tel: + 44 (0) 1273 674400
Fax: +44 (0) 1273 672333
neil@wbstraining.com
http://www.wbstraining.com -
The Inaugural Fixed Income Conference, Prague
15-17th September 2004
Put the event in your diary now and book early for a maximum discount of 20%!
Early bird discount rates:
15% discount before 31st May 2004
10% discount before 31st July 2004
Receive an extra 5% discount with 3 or more delegate bookings from same institution. Maximum discount 20% (no concurring offers).
Conference fee: £1499:00 + UK VAT
Download event pdf: http://www.wbstraining.com/pdf/conference.pdf
This Conference covers all the latest developments in the Fixed Income arena over three streams: Credit Derivatives, Credit Risk and Interest Rate Derivatives. The speaker facility for this event will include some of the world's key pioneers, innovative academics and top practitioners from the fixed income arena.
Confirmed Speaker List:
- Jesper Andreasen: Nordea Markets
- Navneet Arora: Manager, Moody's KMV
- Jeff Bohn: Research Director, MKMV
- Damiano Brigo: Head of Credit Models, Banca IMI
- Mark Davies: Professor of Mathematics, Imperial College London
- Dariusz Gatarek: Capital Markets Group, Deloitte & Touche
- Kay Giesecke: Assistant Professor, Cornell University
- Lisa Goldberg: Vice President, Credit Research, Barra
- Stephen Kealhofer: Managing Director, Founding Principal of KMV
- David Lando: Professor, PhD. Department of Finance Copenhagen Business School
- Jean Paul Laurent: BNP Paribas & University of Lyon
- Fabio Mercurio: Head of Financial Models, Product Banca IMI
- Antoon Pelsser: ING-Insurance & Erasmus University Rotterdam.
- Vladimir Piterbarg: co-Head of Quantitative Research, Bank of America
- Riccardo Rebonato: Head of Group Quants research centre, RBOS
- Philipp Schonbucher: Assistant Professor of Risk Management, ETH Zurich
- Oldrich Vasicek: Founding Principal of KMV
- Alan White: Professor, Rotman University of Toronto
Wednesday 15th September will be a practical workshop day with three different events taking place simultaneously.
Jesper Andreasen: Interest Rate Modeling: From the Basic to the Advanced
Navneet Arora & Jeff Bohn: Moody's KMV Credit Risk Workshop: Building and Testing Debt Valuation Models
Philipp Schonbucher: Basket and Portfolio Credit Derivatives Workshop
Workshop fee: £699:00 + UK VAT. (No discount on workshops)
Thursday 16th September: Day 1: Credit Derivatives Stream
Chairman's comments: Alan White
Synthetic CDO Tranches: Comparing the Performance of different Default Dependency Models.
Philipp Schonbucher: 1 Hour 30 Minutes
Basket Credit Derivatives & Synthetic CDO's
Fully Interactive Q&A session get involved and ask the questions that matter to you: 1 Hour
Panel: Jean-Paul Laurent & Alan White
Valuation of CDO's under different assumptions
Alan White: 1 Hour 15 Minutes
Dynamic Hedging of Basket and Portfolio Credit Derivatives
Speaker to be confirmed : 1 Hour 15 Minutes
Friday 17th September: Day 2: Credit Derivatives Stream
CDS calibration and related option pricing: Tractable intensity model and Market models
Damiano Brigo: 1 Hour 30 Minutes
Comparing copula models for the pricing of basket credit derivatives and CDO's
Jean Paul Laurent: 1 Hour 15 Minutes
CDS Market Models
Fully Interactive Q&A session get involved and ask the questions that matter to you:
1 Hour 20 Minutes Panel: Damiano Brigo Mark Davis & Philipp Schonbucher.
Mark Davis's CDS Presentation & CDS Q&A Questions Available soon!
Thursday 16th September: Day 1: Credit Risk Stream
Chairman's comments: Oldrich Vasicek
Calibrating Credit with Incomplete Information
Kay Giesecke & Lisa Goldberg: 1 Hour 30 Minutes
A model for corporate bonds, swaps and treasury securites
David Lando: 1 Hour 15 Minutes
Credit Risk Q&A: 1 Hour 20 Minutes Panel: Navneet Arora, Jeff Bohn, Kay Giesecke, Lisa Goldberg & Philipp Schonbucher
Analyzing the credit component of corporate bond returns
Stephen Kealhofer: 1 Hour 15 Minutes
Friday 17th September: Day 2: Credit Risk Stream
Bond Market Clearing
Olrich Vasicek: 1 Hour 30 Minutes
Corporate Bond Valuation: Does Size Matter?
Jeff Bohn & Navneet Arora: 1 Hour 15 Minutes
Credit Risk Q&A: 1 Hour 20 Minutes Panel: Kay Giesecke, Lisa Goldberg, David Lando & Oldrich Vasicek
Thursday 16th September: Day 1: Interest-Rate Modelling Stream
Chairman's comments: Riccardo Rebonato
Riccardo Rebonato: Calibrating, pricing and hedging interest-rate products in the presence of smiles 1 Hour 30 Minutes
Fabio Mercurio: Pricing of Inflation-Indexed Derivatives 1 Hour 15 Minutes
Implied dynamics of the swaption skew surface
Vladimir Piterbarg: 1 Hour 15 Minutes
Volatility Smiles Q&A
Fully Interactive Q&A session, get involved and ask the questions that matter to you:
Panel: Damiano Brigo, Fabio Mercurio & Riccardo Rebonato: 1 Hour 20 Minutes
Friday 17th September: Day 2: Interest-Rate Modelling Stream
Pricing Swaptions in Affine Term Structure Models
Antoon Pelsser: 1 Hour 30 Minutes
Interest Rate Exotic Products
Fully Interactive Q&A session, get involved and ask the questions that matter to you:
40 Minutes Panel: Jesper Andreasen & Vladimir Piterbarg
How many factors in Term Structure Models?
Dariusz Gatarek:1 Hour 15 Minutes
A Framework for the Modeling of Vanilla and Exotic Interest Rate Derivatives.
Jesper Andreasen: 1 Hour 15 Minutes
Term Structure Models Q&A
Fully Interactive Q&A session get involved and ask the questions that matter to you:
1 Hour 20 Minutes Panel: Dariusz Gatarek, Antoon Pelsser & Alan White
For all presentation details visit our conference page:
http://www.wbstraining.com/index.php?m=CONFERENCES%202004
For all other inquires contact:
Neil Fowler
WBS Training Ltd
+44 (0) 1273 674400
neil@wbstraining.com -
Basket Credit Derivatives & Synthetics CDOs Workshop
Central London: 22nd / 23rd November 2004
Due to this event being sold out in March 2004 (40 delegates) WBS Training Ltd are pleased to announce another opportunity to attend this highly popular workshop in November 2004!
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
Day 1
08:45 - 9:00 Introduction Philipp J. Schonbucher: Assistant Professor, Department of Mathematics (ETH) Zürich
09:00 - 9:30 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
09:30 - 11:15 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
10:15 - 10:30 Morning Coffee
11:15 - 12:15 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
12:45 - 13:45 Lunch
12:15 - 14:30 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
14:30 - 17:30 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
15:30 - 15:45 Afternoon Coffee
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: 17:30 - 19:00
Day 2
08:45 - 10:15 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
10:15 - 10:30 Morning Coffee
10:30 - 11:30 Case Study
Recai Gunesdogdu: Portfolio Strategy Group CSFB
- Structural default models and CUSP(tm)
- Applications of the portfolio modelling: a case study (PortfolioRisk+)
11:30-12:30 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)
12:30-13:30 Lunch
13:30-14:30 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
14:30-15:30 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
15:30 - 15:45 Afternoon Coffee
15:45 - 17:15 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 -
Securitisation Structuring and Modelling Workshop
Central London,
25th /26th November 2004
Highlights of Workshop
- This is NOT a basic course. The participants must have basic understanding of securitisation structures.
- A 100% practical course that looks at the financial structure and cash flow models of securitisation transactions
- Builds models from issuers, servicers and investors viewpoint
- Participants would be expected to build models for real-life transactions
- Participants must have good knowledge of Excel. Knowledge of VBA is NOT required for this course.
- To derive the most out of this course, participants must bring their own laptops/portable computing devices.
- This course does NOT deal with securitisation law, accounting or taxation, except as may be required for understanding transaction structures.
Workshop Trainer:
Vinod Kothari is recognised globally as an international author, trainer and expert in the areas of Securitisation, Asset Based Financing, Credit Derivatives and Derivative Accounting.
Vinod has delivered training workshops in more than 15 countries around the world, including South Africa, UK, Australia, Malaysia, Jordan, Egypt, Sri Lanka, Bangladesh, Zambia, South America and across India. Vinod is involved in Distance training in the USA, UK, Netherlands, Israel, South Africa, etc. Furthermore he owns the www.vinodkothari.com website which is a highly regarded research tool for banking and financial professionals across the world.
Vinod Kothari has published books in the areas of Securitisation, Credit derivatives and leasing. His books include:
- Securitisation: The Financial Instrument of the New Millennium
- Credit Derivatives and Synthetic Securitisation
- Lease Financing and Hire-purchase
- Securitisation, Asset Reconstruction and Enforcement of Security Interests
His portfolio also includes a variety of published articles for various journals, including Euromoney's Securitisation Review, Duke Journal of Comparative and International Law, Journal of International Banking Law, Asset Finance, US Banker, El Exportrador, Monitordaily, and Equipment Finance Journal. Vinod is a Chartered Accountant, a Company Secretary, acts as the Executive Director of the Asian Securitisation Forum and holds the position of Director at the Association of Leasing and Financial Services Companies (a body of over 500 top leasing companies in India).
Vinod Kothari is currently retained by the Asian Development Bank for a project related to secured lending reforms in India.
Workshop Outline:
Session 1: Securitisation: Quick introduction to securitisation transactions.
- Meaning and features of asset-backed securities
- Isolation of cashflows and originator-independence of securitisation transactions.
- Motivations for issuers and investors
Session 2: Concept of credit enhancement in asset backed securities.
- Equity in corporate finance and credit enhancement
- Credit enhancement and ratings
- Credit enhancement and weighted average cost of the transaction.
Session 3: Securitisation structures: pass through and bond structures.
- CDO structures. Reinvestment type transactions.
- Paydown structures and implications of each.
- Essentials of securitisation structuring - the underlying cashflows.
- Structures in various asset classes: RMBS, CMBS, retail credit, future flows, revolving type.
- Synthetic structures.
Session 4: Financial modeling for securitisation: various purposes of the model.
- Identifying the key determinants of the variables. Introducing each element into a classroom model to notice impact on the transaction. Impact of excess spread, over collaterleralisation and subordination.
Session 5: Model for stress testing of the portfolio and computation of credit enhancement levels. Using the model to stress the assumptions.
- Computing expected losses, mean, variance and volatility.
- Concept of probability of default and loss severity in connection with credit enhancements.
- Seeing the impact on weighted average cost of the transaction.
Session 6: Modeling for cashflow waterfall and investorservicing.
- Identifying inflows and outflows.
- Identifying specific situations - buyback, replacement, reinvestment, prepayment, etc. Using actual pool performance data for waterfall distribution.
- Distribution of losses.
Session 7: Modeling for investor reporting.
- Types of reports required.
- Loss distribution reports for investors.
- Modeling from investor viewpoint.
- Impact of different variables on investors' yield
Session 8: Preparing models based on information in legal documents.
- Studying a real life trust deed/ prospectus and deriving the required details for modeling.
Session 9: Preparing models for accounting reports
- Key requirements - gain on sale, retained asset amortization and valuation of residual interests.
- Valuation based on pool performance data
Participants will be expected to build models of several real life transactions.
Workshop fee £1499:00 + UK VAT
Event contact:
Neil Fowler
Tel: + 44 (0) 1273 674400
Fax: +44 (0) 1273 672333
http://www.wbstraining.com
neil@wbstraining.com -
Hot Business. UnRisk2. When accurate derivatives analytics counts.
Date: July 9, 2004, 2:30-5:45 PM
Location: London City
The UnRisk consortium is pleased to invite you to a free event demonstrating high-end numerical techniques for the pricing and risk analysis of derivatives.
The event will cover
- Finite Element and Streamline Diffusion Techniques
- Identification of Model Parameters in Computational Finance
- The world“s premiere UnRisk2 presentation
Event benefits.
- A concise presentation for practitioners. With details where necessary.
- Exclusive insight.
- Why numerical methods for convection-dominated flows are relevant for computational finance.
- How finite element and streamline diffusion techniques lead to unmatched accuracy.
- Sources of special errors.
- Traps of inverse problems. How, by disturbing the calibration problem, one can obtain better results.
- Live demonstration of UnRisk2.
- Generating values from UnRisk2.
- High-end numerics within a modern software architecture. Visual exploration.
- Working environments for traders, treasurers and quants all using the same pricing engine.
Who should attend.
- Front office professionals who are interested in an alternative derivatives analytics solution
- Quants and risk analysts who want rapid instrument building and modelling
- Managers who want a group solution for the front and mid office.
See: http://www.unriskderivatives.com/news/unriskdaylondon.html
-
- MathFinance Resources
-
Rmetrics
Rmetrics is an open source collection of software packages which may be useful for teaching Financial Engineering and Computational Finance.
The functions are available for R, GNU's S. This is a freely available language and environment for statistical computing and graphics which provides a wide variety of statistical and graphical techniques.
Rmetrics was initiated 1999 for Financial Engineering and Computational Finance under MS Windows 2000/XP.
http://www.itp.phys.ethz.ch/econophysics/R/index.html
-
