Forthcoming events in this series


Fri, 28 Jan 2005
14:15
DH 3rd floor SR

The Malliavin gradient method for calibration of stochastic volatility
models

Christian Ewald
Abstract

We discuss the application of gradient methods to calibrate mean reverting

stochastic volatility models. For this we use formulas based on Girsanov

transformations as well as a modification of the Bismut-Elworthy formula to

compute the derivatives of certain option prices with respect to the

parameters of the model by applying Monte Carlo methods. The article

presents an extension of the ideas to apply Malliavin calculus methods in

the computation of Greek's.

Fri, 18 Jun 2004
14:15
DH 3rd floor SR

Analytic Approximation to Loss Distributions of Heterogeneous Portfolios

Harry Zheng
(Imperial College, London)
Abstract

In this talk we discuss the analytic approximation to the loss

distribution of large conditionally independent heterogeneous portfolios. The

loss distribution is approximated by the expectation of some normal

distributions, which provides good overall approximation as well as tail

approximation. The computation is simple and fast as only numerical

integration is needed. The analytic approximation provides an excellent

alternative to some well-known approximation methods. We illustrate these

points with examples, including a bond portfolio with correlated default risk

and interest rate risk. We give an analytic expression for the expected

shortfall and show that VaR and CVaR can be easily computed by solving a

linear programming problem where VaR is the optimal solution and CVaR is the

optimal value.

Fri, 21 May 2004
14:15
DH 3rd floor SR

Inf-convolution of convex risk emasures and optimal risk transfer

Pauline Barrieu
(London School of Economics)
Abstract

We develop a methodology to optimally design a financial issue to hedge

non-tradable risk on financial markets.The modeling involves a minimization

of the risk borne by issuer given the constraint imposed by a buyer who

enters the transaction if and only if her risk level remains below a given

threshold. Both agents have also the opportunity to invest all their residual

wealth on financial markets but they do not have the same access to financial

investments. The problem may be reduced to a unique inf-convolution problem

involving some transformation of the initial risk measures.

Fri, 07 May 2004
14:15
DH 3rd floor SR

TBA

Christoph Reisinger
(Oxford)
Fri, 07 Nov 2003
14:15
DH 3rd floor SR

Sequential entry and exit decisions with an ergodic criterion

Mihail Zervos
(KCL)
Abstract

We consider an investment model that can operate in two different

modes. The transition from one mode to the other one is immediate and forms a

sequence of costly decisions made by the investment's management. Each of the

two modes is associated with a rate of payoff that is a function of a state

process which can be an economic indicator such as the price of a given

comodity. We model the state process by a general one-dimensional

diffusion. The objective of the problem is to determine the switching

strategy that maximises a long-term average criterion in a pathwise

sense. Our analysis results in analytic solutions that can easily be

computed, and exhibit qualitatively different optimal behaviours.