quants hub workshop days the radisson blu portman hotel, london … · . quants hub workshop days...

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Quants Hub Workshop Days

The Radisson Blu Portman Hotel, London London: 18th, 19th & 20th November 2013

Hear From Leading Industry Experts:

Marco Bianchetti (Intesa Sanpaolo) Pat Hagan (Oxford University)

Karel in’t Hout (University of Antwerp) Jörg Kienitz (Deutsche Postbank)

Massimo Morini (Banca IMI) Alexander Sokol (CompatibL)

This Workshop Provides THREE Booking Options:

Register to ANY ONE day of the workshopRegister to ANY TWO days of the workshop and receive a £200 discount

Register to ALL THREE workshop days and receive a £300 discount

Complimentary Quants Hub video

Register to any two or more workshop days and receive a choice of any free workshop video when the Quants Hub website goes live in Q4 2013!

http://www.wbstraining.com


WHAT IS THE QUANTS HUB?

The Quants Hub offers workshop days in London, Frankfurt and New York where the presenter will be filmed (not the audience) for the forthcoming website. The events will be “quiet” workshops with the focus being on the presenter and all questions reserved for a Q&A session included at the end of each presentation. The Quants Hub members’ website will be live from December 2013 when you will have access to the video of the workshop and the corresponding forum!

QUANTS HUB DELEGATES RECEIVE EXTRA BENEFITS WHEN THEY ATTEND QUANTS HUB WORKSHOP DAYS:

• Free life membership to the Quants Hub website• The workshop presentation video• The workshop presentation slides• Access to the corresponding Quants Hub closed forum for follow up questions moderated by the presenter• Any additional software available as part of the learning experience

For those not attending the workshop days, Quants Hub also serves as a portal for distance learning of quantitative research techniques, where you will be able to purchase our online training video products and learn at your leisure.

Quants Hub includes interactive closed individual forums for each specific workshop to include your distance learning questions going forward. Quants Hub delegates who purchase distance learning products shall automatically become a lifelong member of the Quants Hub benefiting from future webinar offers and other special events.

All this for only £799.00 + UK VAT.

This is a new training concept in our fast moving world, give it a go!

DAY 1: MONDAY 18TH NOVEMBER / WORKSHOP 1

Advanced Interest Rate Modelling (Part 1)by Pat Hagan: Consultant & Mathematics Institute, Oxford University

Basic Fixed Income Instruments

• Basics: discount factors, FRAs, swaps, and other delta products• Basic curve stripping, bucket deltas, and managing IR risks• Martingales & the fundamental theorem• Vanilla options (caps, floors, and swaptions) & Black’s model• Vol matrices, bucket vegas, and managing vol risks• Smiles, local volatility models, and equivalent volatilities• Mishedging, and the development of the stochastic vol model• Using the SABR model to manage volatility smiles, hedging stability• Lévy based models for managing volatility surfaces

Current Market Practice

• Money vs. scrip• Holiday calendars, business day rules, and schedule generation• Day count fractions

Advanced Delta

• Reference rates & basis spreads• Stripping reference rates to obtain basis spreads• OIS discounting and dual-curve stripping• Cross-currency basis curve; collateralizing legs in alternate ccy• Leverage, cost of funds, and the credit crisis• Moving to scenario-based risks and hedging

Arbitrage Free SABR• • Arbitrage in the SABR model• Reduction to the effective forward equation• Arbitrage free boundary conditions• Exactly conservative numerical methods• Comparison with historical data• Hedging under SABR model• Closed-form solutions; boundary layer analysis

Day schedule: 09:00 – 17:30Break: 10:30 – 10:45Lunch: 12:30 – 13:30Break: 15:15 – 15:30


Modern Interest Rates (Part 1)by Marco Bianchetti: Head of Financial Modelling & Validation, Market Risk Management, Derivatives Pricing, Intesa Sanpaolo

Modern Interest Rates with Collateral, Funding and Credit

The Interest Rate Market Across the Credit Crunch

• Libor/Euribor/Eonia interest rates• Interest rate market segmentation after the credit crunch• Xibor and counterparty/liquidity risk• Counterparty risk and collateral

Classical Interest Rate Market Practices & Models

• Short rate, Bank account, Zero coupon bond• Pricing measures• Discount/capitalization factors and Deposit contract• Forward Xibor rate and FRA/Futures contract• Forward Swap Rate, Swap and Basis Swap contract• Overnight Indexed Swap (OIS) contact• Cap&Floor/Swaption contract• Classical, single curve, pricing & hedging interest rate derivatives

Modern Interest Rate Market Practices & Models: 1st Step

• The multiple-curve market approach• Basic assumptions and notation• “Ingenuous” pricing approach: FRAs, Swaps, Caps/Floors, Swaptions• No arbitrage and forward basis• Foreign-currency analogy approach

Modern Interest Rate Market Practices & Models: 2nd Step

• Restating the problem, basic assumptions and notation revisited• Modern pricing of vanillas: FRAs, swaps• Modern pricing of vanilla options: caps/floors/swaptions, Black’s formula revisited• Multi-curve bootstrapping:• Introducing modern interest rate models:• Beyond the Black’s model: smile generation• SABR revisited• Excel classwork: SABR construction and calibration• Multiple curves, multiple deltas, multiple hedging

Switching to CSA Discounting in Practice

• Revealing CSA discounting in plain vanilla quotes• Testing SABR calibration against CSA discounting• Issues in CSA discounting:• Market issues• Funding issues: trades with or without CSA, CSA chaos, the new ISDA standard CSA• The CVA/DVA/FVA puzzle• Accounting issues and the forthcoming IFRS13• IT issues• Risk Management issues• Management issues• The role of quant

Conclusions & Selected References



Constructing and Calibrating Long Dated Heavily Multifactor Models for CVA/PFEby Alexander Sokol: CEO and Head of Quant Research, CompatibL

The workshop will focus on the specifics of constructing and calibrating models for CVA/PFE which must simulate the evolution of a large number of risk factors for long time horizons and with incomplete calibration data. Both risk neutral and real world measure models will be covered with specific focus on avoiding extreme or unrealistic values of risk factors for long time horizons and dealing with incomplete or short dated calibration data.

Session 1 – Methodology Fundamentals

• Risk Factor Mapping to Generic Rate and Asset Factors• Model Construction in Real World Measure• Model Construction in Risk Neutral Measure• Advanced Modeling of MPR under CSA/SCSA• PCA and Incremental Correlation Techniques

Session 2 – Risk Neutral Measure Models

• Review of Popular Model Choices• Trade Specific Calibration• Techniques for Avoiding Extreme Parameter Values• Calibration of Long Dated Vol and Skew• Calibration of Correlation

Session 3 – Real World Measure Models

• Review of Popular Model Choices• Trade Specific Calibration• Techniques for Avoiding Extreme Parameter Values• Setting Long Dated Drift in Real World Measure• Calibration of Stochastic Processes• Calibration of Correlation

Session 4 – Valuation

• Acceleration Techniques for Linear Trades• Acceleration Techniques for Nonlinear Trades• Path Consistent Valuation under Trade Specific Models• Path Consistent Out Of Model Valuation


DAY 2: TUESDAY 19TH NOVEMBER / WORKSHOP 1

Advanced Interest Rate Modelling (Part 2)by Pat Hagan: Consultant & Mathematics Institute, Oxford University

Managing Exotics

• Three elements to modern pricing: model, calibration, and evaluation• Choosing a model and the five main interest rate risks• HJM models - strengths, weaknesses, usage• BGM/LMM models - strengths, weaknesses, usage• Short rate models - strengths, weaknesses, usage• Markovian models - strengths, weaknesses, usage

Practical Pricing of Exotics

• LGM model• Closed form zero coupon bond and swaption prices under the LGM model• Callable swaps (Bermudans)• Calibration strategies and the selection of calibration instruments• Forward volatility risk• How the risks, hedges, and values of the exotic depend on the calibration instruments

Adjustors and Risk Migration

• Classic mis-hedging problem• Risk migration and the adjusted price• The adjusted price• Examples

Pricing Callable Range Notes (accrual options)

• Standard range note• Using replication to price the non-callable range notes. Convexity adjustments• Pricing requirements• Libor market model vs. external adjustors vs. internal adjustors• Using internal adjustors with the LGM modle• Pricing, risk analysis, and hedging the embedded and external options• General procedure for callables with embedded options



Modern Interest Rates (Part 2)

by Massimo Morini: Head of Interest Rate & Credit Models, Coordinator of Model Research, Banca

IMI

Modern Interest Rates with Collateral, Funding and Credit

Fixed Income Modeling with Multicurves

• Interest rate modeling: from basics to advanced

• Advanced Multicurve Modeling, the three approaches:

• Hull&White

• HJM framework

• BGM Libor Market Model

• The market standard model for CSA discounting and tenor basis pricing

• The advanced solutions with stochastic basis

• Adapting volatility to tenor and correlating tenor curves

• Implementation, derivatives pricing, hedging (mis- and super-hedging)

Rates with Credit and Funding

• Counterparty and Wrong way Risk for Rates derivatives

• The credit spread hidden in today rates

• Current relation between spot and forward

• Credit, liquidity, funding to explain the basis

• A credit model that replicates the tenor basis

Cutting Hedge in Fixed Income

• Negative rates

• Cost of clearing, initial margin and Fra-Futures basis

• Cross currency and collateral

• Constructing curves when curves are missing

• Rates in Regulatory risk models

• Pricing Bermudans and Model Risk

References:

• Interest Rate Modelling after the Financial Crisis. M. Bianchetti and M. Morini, Risk Editions

• Counterparty Credit Risk, Collateral and Funding: With Pricing Cases For All Asset Classes. D. Brigo, M. Morini

and A. Pallavicini, Wiley

• Understanding and Managing Model Risk: A Practical Guide for Quants, Traders and Validators. M. Morini, Wiley

Finance

Day schedule:

Break:

Lunch:

Break:

09:00 – 17:30

10:30 – 10:45

12:30 – 13:30

15:15 – 15:30


Monte Carlo Simulation in Finance (Part 1)by Jörg Kienitz: Head of Quantitative Analysis, Treasury, Deutsche Postbank

Monte Carlo Simulation in Finance: Models, Algorithms and Practice with Application to Derivatives Pricing, Risk Measures and CVA (To be confirmed)

Summary:

The goal of this two day seminar is to provide a detailed overview, offering insights into the latest techniques of modeling uncertainty in financial markets and demonstrating computational methods to tackle the industry applied models. We show the applicability of Monte Carlo simulation to derivatives pricing, risk measurements or CVA calculation.

We explain how the basic method is set up and we discuss the main ingredients. Finally, we discuss methods for improving and speeding up the method as well as recent techniques for calculating Greeks.

Each single topic is illustrated using Matlab code (No Laptops are needed for this event, however delegates will be given example sheets).

The seminar is an ideal way to get a detailed overview of Monte Carlo methods and how to apply such techniques to problems arising in finance.

Main Topics:

This seminar discusses the application of Monte Carlo simulation to financial problems. Problems include scenario generation, risk measures, derivatives pricing or CVA calculation. The bullet points are:

• Probability Theory and Stochastic Processes• One and multifactor models• General purpose and special sampling schemes for e.g. Heston or SABR models• Static and dynamic Monte Carlo Methods• Risk Measures via scenario generation• Derivatives pricing and hedging strategies• Interest rate simulation and CVA• Calculating sensitivities (‘Greeks’) and early exercise rights• Implementing Monte Carlo methods

Methods:

• Presentation (slides)• Illustration using computer examples

Prerequisites:

To participate in this course, you need to have a basic background in stochastic modelling but all the concepts and models are introduced and discussed in detail.

Day 1 Topics:

Mathematical Basics

• Foundations of Probability• How does Monte Carlo Work?• Distributions• Basic Distributions in Finance

• Stochastic Processes• Diffusion Processes• Jump-Diffusion Processes• Jump Processes

Applications of the Monte Carlo Method

• Option Pricing

• Evaluating Hedge Strategies• Scenario Generation and Risk Measures

Static Monte Carlo Simulation

• Sampling from the Uniform Distribution• Random Number Generators• Good ones and bad ones

• Sampling Techniques• Inverse Method• Ratio of Uniforms

• Sampling from the Normal and other Distributions

Dynamic Monte Carlo Simulation

• Path Generation Methods• (Log) Euler-Scheme• Predictor Corrector• Bridge Sampling• Exact Sampling

• Sampling from Jump Diffusion Processes• SGS Sampling• FGS Sampling

• Sampling from Pure Jump Processes• Variance Gamma, NIG• Stochastic Volatility Lévy Models

Implementation Issues (from Algorithms to Code I)

• Ingredients for a successful implementation of Monte Carlo algorithms• Object Oriented Design I


DAY 3: WEDNESDAY 20TH NOVEMBER / WORKSHOP 1

ADI Schemes for Pricing Options under the Heston Modelby Karel in’t Hout: Professor of Applied Mathematics and Numerical Analysis, University of Antwerp

This training course includes the Matlab source code for computing vanilla and barrier option prices, together with their Greeks, under the Heston model. The numerical solution technique is based on a suitable finite difference discretization on nonuniform spatial grids followed by a state-of-the-art ADI time discretization scheme.

• Heston PDE for vanilla and barrier option prices• Initial and boundary conditions• Specific issues: mixed derivative, Feller condition• Domain truncation• Nonuniform spatial grids• Spatial discretization: finite difference (FD) schemes• Temporal discretization: four state-of-the-art ADI schemes• Linear systems: LU factorization• Stability and convergence analysis• Specific issues: damping procedure, cell averaging• Step-by-step discussion of the HestonADI code (Matlab)• Numerical experiments• Approximation of the Greeks

Day schedule: Break: Lunch:

09:00 – 15:00 10:30 – 10:45 12:30 – 13:30


Valuation Adjustments: Pricing and Risk Managementby Andrea Prampolini: Head of Counterparty Risk Management, Banca IMI

Adjusting the Value of Derivatives

• The rise of a hybrid asset class• Operational evolution• Perspectives on value

Credit Value Adjustment

• Counterparty risk and financial stability• Computing conditional expectations• Global calibration• Sensitivities• Transfer pricing• Mitigation and management

Debt Value Adjustment

• Fair value and the law of one price• Hedging DVA• Allocation of DVA costDebt Value Adjustment

Funding Value Adjustment

• Funding cost and funding benefit• Evidence from the novation market• Managing FVA• Financing initial margin

Capital Charge

• Forward RWA• Managing the cost of capital• Contingent capital structure



Monte Carlo Simulation in Finance (Part 2)by Jörg Kienitz: Head of Quantitative Analysis, Treasury, Deutsche Postbank

Summary:

The goal of this two day seminar is to provide a detailed overview, offering insights into the latest techniques of modeling uncertainty in financial markets and demonstrating computational methods to tackle the industry applied models. We show the applicability of Monte Carlo simulation to derivatives pricing, risk measurements or CVA calculation.

We explain how the basic method is set up and we discuss the main ingredients. Finally, we discuss methods for improving and speeding up the method as well as recent techniques for calculating Greeks.

Each single topic is illustrated using Matlab code (No Laptops are needed for this event, however delegates will be given example sheets) .

The seminar is an ideal way to get a detailed overview of Monte Carlo methods and how to apply such techniques to problems arising in finance.

Main Topics:

This seminar discusses the application of Monte Carlo simulation to financial problems. Problems include scenario generation, risk measures, derivatives pricing or CVA calculation. The bullet points are:

• Probability Theory and Stochastic Processes• One and multifactor models• General purpose and special sampling schemes for e.g. Heston or SABR models• Static and dynamic Monte Carlo Methods• Risk Measures via scenario generation• Derivatives pricing and hedging strategies• Interest rate simulation and CVA• Calculating sensitivities (‘Greeks’) and early exercise rights• Implementing Monte Carlo methods

Methods:

• Presentation (slides)• Illustration using computer examples

Prerequisites:

To participate in this course, you need to have a basic background in stochastic modelling but all the concepts and models are introduced and discussed in detail.

Day 2 Topics:

CVA - Simulating Future Interest Rates

• Simulating Short Rate Processes• Hull-White• CIR

• Calculating CVA/DVA/FVA for Fixed Income Products

Speeding up and improving your Monte Carlo

• Variance Reduction Techniques• Antithetic Sampling• Control variates• Importance Sampling• Stratification• Multi-Level Monte Carlo

• Quasi Random Numbers

• Halton Sequence• Sobol Sequence

Simulating Multi-Dimensional Models

• Introducing Dependence• Correlation• Copula

• Scenario Generation and Risk Measures (Calculating CVaR using Simulation)• Multi-Dimensional Normals• Simulating Market Models (LMM)• Simulating Stochastic Volatility Models (SABR and Heston)

Greeks (Adjoint, Proxies) and Early Exercise

• The Adjoint and Proxy Methods• American Monte Carlo• Bermudan Options• Backward Script for CVA calculation

• Illustration using Libor Market Model

Implementation Issues (from Algorithms to Code II)

• Choosing the Language for Development• Object Oriented Design II


Quants Hub Workshop Days

The Radisson Blu Portman Hotel, LondonLondon: 18th, 19th & 20th November 2013

Delegate details:

Company:

Name:

Job title/Position:

Name:

Job title/Position:

Name:

Job title/Position:

Department:

Address:

Country:

Telephone:

E-mail:

Date:

Signature:

Registration:Tel: +44 (0)1273 201 352Fax: +44 (0)1273 201 360

Contact:http://[email protected]

Any One Day:

Any Two Days (£200 Discount):

All Three Days (£300 Discount):

£799.00 + UK VAT

£1398.00 + UK VAT

£2097.00 + UK VAT

c

c

c

Workshop Fee Structure: Workshop Selection:

c Day 1 Workshop 1 (Pat Hagan – Part 1)c Day 1 Workshop 2 (Marco Bianchetti – Part 1)c Day 1 Workshop 3 (Alexander Sokol)c Day 2 Workshop 1 (Part Hagan – Part 2)c Day 2 Workshop 2 (Massimo Morini – Part 2)c Day 2 Workshop 3 (Jörg Kienitz – Part 1)c Day 3 Workshop 1 (Karel in’t Hout)c Day 3 Workshop 2 (Andrea Prampolini)c Day 3 Workshop 3 (Jörg Kienitz – Part 2)

To register, please fax the completed booking form to:

+44 (0)1273 201 360Flight details: All delegates flying into London on the morning of the event are reminded that they should arrive 30 minutes be-fore the workshop starts for registration. The hotels West End location is approximately 1 hour from all 3 main London airports, Heathrow, Gatwick and City. Returning flights should equally allow for the events finishing time.

Sponsorship: World Business Strategies Ltd, offer sponsorship oppor-tunities for all events, E-mail headers and the web site. Contact sponsorship via telephone on : +44 (0)1273 201 352

Disclaimer: World Business Strategies command the rights to cancel or alter any part of this programme.

Cancellation: By completing of this form the client hereby enters into a agreement stating that if a cancellation is made by fax or writing within two weeks of the event date no refund shall be given. However in certain circumstances a credit note maybe issued for future events.

Prior to the two week deadline, cancellations are subject to a fee of 25% of the overall course cost.

Discount Structure: The discount is available on any day permutation, and can be combined across delegates within the same company (only at the time of booking and not retrospectively).


mailto:[email protected]

quants hub workshop days the radisson blu portman hotel, london … · . quants hub workshop days...

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