Post-Crisis Quant Finance

  • ID: 2498899
  • Book
  • Incisive Media
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This book outlines practically relevant solutions to the complexities faced by quants post-crisis. Each of the 20 chapters targets a specific technical issue including pricing, hedging and risk management of financial securities.

Post-Crisis Quant Finance is a must-read for quants, statisticians, researchers, risk managers, analysts and economists looking for the latest practical quantitative models designed by expert market practitioners.

The financial crisis of 2007-8 shook the world of quantitative finance. First, it caused the industry as a whole to question long-held truisms which threw into doubt the pricing of even the most vanilla of derivatives. Second, the regulatory response dramatically reshaped the derivatives industry leading quants to shift their focus on capital, funding and of course risk.

The result has not been, as some doomsayers predicted, the end of quantitative finance or appreciation of its contribution financial institutions and markets. Rather, quants have begun to rebuild. Aware now that frictions in markets under duress are the norm, not the exception, they are improving existing resilient models and developing new ones.

“This timely book shows very clearly that well thought through modelling is not only useful but necessary in order to help financial markets to operate smoothly and perform their social role properly...After reading this book it becomes clear that in the future these new and more realistic and accurate models will find wide applications and thus flourish and expand...The reader will benefit from the expertise of some of the sharpest thinkers in the field”.

Alex Lipton, Bank of America Merrill Lynch and Imperial College
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Introduction
Mauro Cesa, Risk Magazine

Part 1 - Derivatives Pricing

1 - Smile dynamics IV
Lorenzo Bergomi, Société Générale

2 - Funding beyond discounting: collateral agreements and derivatives pricing
Vladimir Piterbarg, Barclays Capital

3 - Two curves, one price
Marco Bianchetti, Intesa Sanpaolo Bank

4 - A Libor market model with a stochastic basis
Fabio Mercurio, Bloomberg

5 - Volatility interpolation
Jesper Andreasen and Brian Huge, Danske Bank

6 - Random grids
Jesper Andreasen and Brian Huge, Danske Bank

7 - Being particular about calibration
Julien Guyon, Bloomberg, and Pierre Henry-Labordère, Société Générale

8 - Cooking with collateral
Vladimir Piterbarg, Barclays Capital

Part 2 - Asset and Risk Management

9 - A dynamic model for hard-to-borrow stocks
Marco Avellaneda, New York University, and Mike Lipkin, Colombia University and Katama Trading

10 - Shortfall factor contributions
Richard Martin, AHL, and Roland Ordovàs, Banco Santander

11 - Stressed in Monte Carlo
Christian Fries, DZ Bank

12 - A new breed of copulas for risk and portfolio management
Attilio Meucci, Kepos Capital

13 - A historical-parametric hybrid VAR
Robin Stuart, State Street Corporation Global Markets

14 - Impact-adjusted valuation and the criticality of leverage
Jean-Philippe Bouchaud, Capital Fund Management Paris, Fabio Caccioli, Santa Fe Institute, and Doyne Farmer, Institute for New Economic Thinking and University of Oxford

Part 3 - Counterparty Credit Risk

15 - Being two-faced over counterparty credit risk
Jon Gregory, Solum Financial Partners

16 - Real-time counterparty credit risk management in Monte Carlo
Luca Capriotti, Jacky Lee, Credit Suisse, and Matthew Peacock, Axon Strategies

17 - Counterparty risk capital and CVA
Michael Pykhtin, Federal Reserve Board

18 - Partial differential equation representations of options with bilateral counterparty risk and funding costs
Christoph Burgard and Mats Kjaer, Barclays Capital

19 - Close-out convention tensions
Damiano Brigo, King's College London, and Massimo Morini, Banca IMI

20 - Cutting CVA's complexity
Pierre Henry-Labordère, Société Générale
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Mauro Cesa is the technical editor of the Risk Management and Alternative Investment (RMAI) division at Incisive Media in London. Since 2009, he has been responsible for the Cutting Edge section of Risk, Energy Risk, Insurance Risk and ETF Risk magazines. Cutting Edge publishes peer-reviewed quantitative finance articles with a focus on the pricing and hedging of financial instruments, as well as risk management relevant to investment banking, buy-side industry, energy firms and insurance companies. Before joining Incisive Media in 2007, Mauro worked with the quantitative asset management team at Eurizon Capital in Milan on equity and fixed income investment models for mutual funds and pension funds. He studied economics at Trieste University and Aarhus University, and holds an MA in quantitative finance from Brescia University.
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