Module 5: Advanced Modelling Topics 1


Please note that in exceptional circumstances it may be necessary to cancel or alter a particular lecture, so that these details are subject to small variation.

  • Asymptotic methods: examples of regular perturbation, singular perturbation, multiple scales and matched asymptotic expansion methods

  • European options in incomplete markets: The lectures discuss the valuation and hedging of European claims in incomplete markets via utility-based methods. A basis risk model is used as the main example of an incomplete market. Utility indifference valuation and hedging is described, and the performance of utility-based strategies in the basis risk model is demonstrated. The case with partial information on asset price drifts is discussed. Convex duality for optimal investment in incomplete markets is described, leading to a dual approach to utility-based valuation, and the the basis risk model is re-visited via duality.

  • Interest rate products: implementation and calibration: The lectures will cover advanced interest rate models and the core techniques to implement these into production environments. This includes models for multiple interest rate curves in a single currency and multi-currency models, which are needed for counterparty and funding valuation adjustments. The emphasis is on practical aspects of model implementation and the trade-offs faced in practice. Monte Carlo methods feature prominently due to the high dimensionality of most advanced models.

  • Hybrid interest rate products

  • Cross currency collateralisation

Module 5 - 19-22 September 2017

PDF icon M5 2017 timetable

Course Materials

Course Materials are only available to those registered to attend.


Assignment - Due 6 November 2017

Assignment can be found under Course Materials.

Assignment template

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Short Course option

If you are wishing to take the next Advanced Modelling Topics 1 module as a short course, registration will open over the summer and closes one week before the start of the course.