Clik here to view.
MS Excel and Risk Management does not blend, or does it?
In many businesses, the risk management grows from a very simple spread sheet into a complex cash flow model. If this complex cash-flow model stays in Excel, then you get an explosive combination. A...
View ArticleClik here to view.
How can I visualize my model data in an interactive webpage?
A brilliant website is the perfect example for user friendly interactive data visualization: Gapminder. This website presents statistical data about the countries of the world and how it changes in...
View ArticleClik here to view.
What happens to Portfolio Protection (esp. CPPI) under Transaction Costs and...
One of the most popular portfolio protection trading strategies is the Constant Proportion Portfolio Insurance (CPPI). This strategy maximizes the exposure in stock at each rebalancing time while...
View ArticleClik here to view.
What is a Good Design for a Pricing Library? Use a Payoff Description Language
A good library design requires a separation of the functionality into modules with an appropriate API. The size of the modules is determined by the application. While for a simple trading application a...
View ArticleClik here to view.
What is the Difference Between Risk-Neutral Valuation and Real-World Valuation?
In option pricing, two technical terms often create confusion. One term is “risk-neutral” and the other “real-word”. You hear these terms in the context of option pricing, backtesting, risk management...
View ArticleClik here to view.
Expect the Unexpected: Risk Management Must Be Creative
Modern risk management is a real challenge. Today, I played with my levitation device. I noticed that most people do not believe that levitation is real. In fact there is a formal proof that levitation...
View ArticleClik here to view.
What is Model Risk and What Can I Do About it?
Model risk is the risk that the market models in investment banking do not properly reflect the reality. This risk is often neglected or simply ignored. But, it is one of the most important risks as we...
View ArticleClik here to view.
What is Historical Volatility and Why Do We Need Implied Volatilities?
Looking at financial instruments, one often finds the term implied volatility. In this post, we want to describe what it is and what you can do with it. We start refreshing the term historical...
View ArticleClik here to view.
Early Exercise: Curse or Blessing
Many financial contracts come with the right of exercising a right prematurely. Such early exercise rights are a clear advantage for the option holder. But, these rights create optimal stopping...
View ArticleClik here to view.
Financial Modelling (with Matlab Source): A great new book
Joerg Kienitz and Daniel Wetterau present “Financial Modelling: Theory, Implementation and Practice with MATLAB Source”, a great resource on state-of-the-art models in financial mathematics. The...
View Article