Derivative Insights & Innovations from Numerix

Derivative                                                         Insights & Innovations Newsletter from Numerix
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Vol III, Issue 4 April 2015
In This Month's Issue
 
 
 
Industry News and Insight
 
A Quantitative Perspective: The SABR Model & Negative RatesVideo Blog | A Quantitative Perspective: The SABR Model & Negative Rates
In this video blog, Dr. Alexandre Antonov, Numerix SVP of Quantitative Research, discusses how the recent development of the Free Boundary SABR model for option pricing is a natural and efficient extension of the classical SABR model. Alexandre highlights how the Free Boundary SABR Model is able to overcome some of the limitations presented by the Shifted SABR Model. Watch Now
 
Backward Induction for Future ValuesNumerix Research Paper | Backward Induction for Future Values
In this paper, Drs. Alexandre Antonov, Serguei Issakov and Serguei Mechkov generalize the American Monte Carlo method to efficiently calculate future values (or exposures) of derivatives using an arbitrage-free model. They propose a new algorithmic method of simulation of exposures (distributions of future values) based on an iterative backward induction, a generalization of backward induction, especially attractive for exotic portfolios. Read Paper
 
 The Free Boundary SABR: Natural Extension to Negative RatesNumerix Research Paper | The Free Boundary SABR: Natural Extension to Negative Rates
In this paper, Drs. Alexandre Antonov, Michael Konikov, and Michael Spector have presented a natural generalization of the SABR model to negative rates—which is very important in the current low-interest-rate environment. The paper derives an exact formula for the option price in the zero-correlation case and an efficient approximation for general correlation. The simplicity of the approximation permits a straightforward implementation. Moreover, the main formulae from the “absorbing” (standard) SABR approximation can be directly reused. Read Paper
 
On-Demand Webinar | The Free Boundary SABR: Natural Extension to Negative Rates
Featured speakers Dr. Alexandre Antonov and Dr. Michael Konikov discuss in detail how the SABR model can be extended to incorporate a “free boundary” SABR process, which more naturally permits negative rates than a shifted SABR process and eliminates the arbitrary lower bound on rates. View Webinar
 
 
Industry News and Insight
 
Reducing the Risk of Using Financial ModelsIndustry Research Report | Reducing the Risk of Using Financial Models
In this Special Report, Reducing the Risk of Using Financial Models, author Kevin McPartland, Head of Market Structure and Technology Research at Greenwich Associates, explores how the movement by financial institutions and regulators to develop standardized processes and technology for managing financial model risk would lower costs and potentially reduce systemic risk. Read Paper
 
On-Demand Webinar | Challenges & Opportunities in Dealing with Model Risk: A Panel Discussion with Greenwich Associates & Numerix
Join Kevin McPartland of Greenwich Associates, along with Dr. David Eliezer and Satyam Kancharla of Numerix, for a panel discussion examining the recent research findings from Greenwich Associates. Our panelists explore how firms can overcome model risk management challenges and find new opportunities. View Webinar
 
 
Most Watched Videos

Incorporating XVA into the Valuation Process

Pricing Model Validation – Regulation & Best Practices

A Primer on Funding Value Adjustment (FVA): Numerix Video Blog

Leveraging Real-world and Risk Neutral ESG solutions within Insurance

John Hull on the FVA Debate and Liquidity Risk in OTC Derivatives

Most Read Blogs

Industry News and Insight
 
Trading Book
In this video blog, Numerix SVP Satyam Kancharla breaks down the key components of the Fundamental Review of the Trading Book. Specifically he addresses Expected Shortfall vs. VaR, Liquidity Horizons, as well as the overall approach to internal models-based measurement and the revised standardized approach. Watch Now
 
 
U.S.                               Insurers Tackle Model Risk ManagementVideo Blog | U.S. Insurers Tackle Model Risk Management
Alex Marion, VP of Client Solutions Group for Insurance at Numerix discusses the best practices U.S. insurers are utilizing to manage model risk. With the introduction of capital markets models alongside traditional actuarial models, as well as real-world and risk neutral dynamics, Alex also discusses new complexities insurers are having to face as they look to build-out a sound enterprise model risk management framework. Watch Now
 
 
Trading Impact
From Europe to Asia it seems not a day goes by without news of another major central bank easing monetary policy, or taking rates to zero, or below. As the “Currency Wars” debate heats up, in this video blog Numerix FX expert Udi Sela, focuses in on Denmark and the recent pressure they’ve been under. Udi examines the outlook for the Danish Krone and how the negative rate environment is impacting FX options trading strategies. Watch Now
 
 
Industry News and Insight
 
Case Study | Banque Internationale à Luxembourg (BIL)
Learn how Banque Internationale à Luxembourg (BIL) uses the Numerix CrossAsset analytics platform to support its model validation and model comparison processes to conduct rigorous model analysis to independently validate pricing and risk sensitivity outputs. Read Case Study

Industry News and Insight
 
News Article | Automated Trader - Numerix Addresses Global Negative Rates Concern with SABR Model Extension
The Free Boundary SABR proposed by Numerix has the same number of parameters as the classical SABR with no shift needed, and it's equipped with an efficient and accurate analytical approximation, crucial for the fast calibration. The related research paper, The Free Boundary SABR: Natural Extension to Negative Rates, derives an exact formula for the option price in the zero-correlation case, and an efficient approximation for general correlation. Read Article
 
Events and                                 Webinars
 






 
 
For more information about Numerix webinars please visit www.numerix.com/events-and-webinars.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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