The Wilmott Forums are probably the longest established discussion boards for Quants on the web.
What journal subscription can give you this level of immediate access to credit research?
Among extreme events that threaten lives and infrastructure, terrorist attacks present one of the biggest challenges for government and business, particularly for the insurance industry. So little is known about the potential nature, location, frequency and impact of events, such as the attacks of Sept. 11, 2001. Both insurers and reinsurers have thus great difficulty in quantitatively assessing and managing terrorism risk to determine what type of coverage they can provide and the premiums they should charge.
The original and best Value-at-Risk portal, the the site has grown dramatically since it's launch in 1996 and now serves as a resource for the community of individuals interested in Value at Risk and more generally financial risk management.
By Emanuel Derman - Emanuel Derman was one of the first physicists to move to Wall Street, and his career paralleled the growth of quantitative trading over the past twenty years. In My Life as a Quant, he traces his transformation from ambitious young scientist to managing director and head of the renowned Quantitative Strategies group at Goldman, Sachs & Co.
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By Peter Forsyth (2007) "Men wanted for hazardous journey, small wages, bitter cold, long months of complete darkness, constant dangers, safe return doubtful. Honour and recognition in case of success." Advertisement placed by Earnest Shackleton in 1914. He received 5000 replies. An example of extreme risk-seeking behaviour. Hedging with options is used to mitigate risk, and would not appeal to members of Shackleton’s expedition.
Satyajit Das writes: Finance and economics are not immune to this conflict between "truth" and "aesthetics". "Risk Management" is a beautiful lie. Beautiful lies are lies that we know are not true but desperately want to believe in...
Satyajit Das is a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives.
Although a substantial literature has examined the statistical and economic meaning of Value-at-Risk models, this article by Jeremy Berkowitz and James O’Brien is the first to provide a detailed analysis of the performance of models actually in use.
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By Emanuel Derman, Columbia University and Prisma Capital Partners LP and Nassim Nicholas Taleb, U. Massachusetts, Amherst and Empirica LLC. While modern financial theory holds that options values are derived by dynamic replication, they can be correctly valued far more simply by long familiar static and actuarial arguments that combine stochastic price evolution with the no-arbitrage relation between cash and forward contracts.
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By Carol Alexander & Leonardo Nogueira. Abstract: This paper formalizes the class of scale-invariant volatility models and explores its hedging properties. A model is 'scale-invariant' if and only if its probability distribution of asset returns is independent of the current level of the asset price. We provide a set of equivalent properties that are useful for classifying new and complex models according as scale invariance or otherwise. We show that scale invariance is a property that is shared by most stochastic volatility and jump-diffusion models and even Levy models, however only some local volatility models are scale-invariant. It is known that all scale-invariant models produce the same 'model-free' price sensitivities for vanilla options when calibrated to the implied volatility skew. We show that these model-free hedge ratios are not necessarily optimal and derive optimal hedge ratios in the presence of the skew. An empirical comparison of popular models applied to SP 500 index options shows that optimal hedges are similar in all the smile-consistent models considered and they perform better than the Black-Scholes model on average. The 'model-free' deltas and gammas provide the poorest hedges.
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By Yishen Li and Jin E Zhang. Abstract. In the Black–Merton–Scholes framework, the price of an underlying asset is assumed to follow a pure diffusion process. No-arbitrage theory shows that the price of an option contract written on the asset can be determined by solving a linear diffusion equation with variable coefficients. Applying the separating variable method, the problem of option pricing under state-dependent deterministic volatility can be transformed into a Schrodinger spectral problem, which has been well studied in quantum mechanics. With Weyl–Titchmarsh theory, we are able to determine the boundary condition and the nature of the eigenvalues and eigenfunctions. The solution can be written analytically in a Stieltjes integral. A few case studies demonstrate that a new analytical option pricing formula can be produced with our method.
The Journal of Credit Risk is an international refereed journal focusing on the measurement and management of credit risk, the valuation and hedging of credit products, and the promotion of greater understanding in the area of credit risk theory and practice. Credit risk research in both industry and academia is extensive. The majority of this research is not accessible to a wider audience due to the highly technical nature of the research papers. The Journal of Credit Risk, therefore, has three fundamental aims: 1. to foster high-quality, original and innovative work; 2. to provide practitioners and academics with access to the resulting technical research; and 3. to serve as an educational forum on timely issues concerning credit risk in general.
A new Open Access Journal focusing on risk and decision analysis processes and methodology, including quantitative methods and psychology of judgment and decision making in project management.
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Business and Economics, Finance /Banking and Economics/Management Science
Edward Jay Epstein writes at Slate Magazine.
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By Fischer Black, published in The Journal of Financial Economics 3 (1976) 167–179.
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By Riccardo Rebonato - Financial institutions are obviously concerned about the possibility of direct losses arising from mis-marked complex instruments. They are becoming even more concerned, however, about the implications that evidence of model risk mismanagement can have on their reputation, and their perceived ability to control their business.
Rene M. Stulz provides a typology of risk management failures and show how various types of risk management failures occur.
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A collection of titles at the MoneyScience Financial Intelligence Bookshop.
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Not too sure about what an eigenvector is? Or perhaps Ito's Lemma sounds like an animal to you. Whatever it is, you will find a detailed but yet simple guide to common terminology used within quantitative finance and risk management.
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Quantnotes.com was founded by Alessio Farhadi, Henry Tang and Raffaello Vardavas some years ago and though is hasn't been regularly updated in recent years, it still contains some useful links and resources.
The Office for Futures and Options Research at University of Illinois at Urbana-Champaign promotes and enhances scholarly research and learning of futures, options, and derivative markets.
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Traditional risk management tools focus on what is normal and consider extreme events as ancillaries. In a world characterised by volatility and uncertainty, Benoit Mandelbrot and Nassim Taleb argue that this approach is misguided, and propose an alternative methodology where large deviations dominate the analysis.
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The Risk Theory Society, originally founded in August, 1963 as the Risk Theory Seminar, is a self-administered organization within the American Risk and Insurance Association (ARIA) whose purpose is to foster research into topics in risk theory and risk management.
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A mixed resource with a lot of helpful articles and tutorials covering risk management and financial engineering generally.
The 1998 failure of Long-Term Capital Management (LTCM) is said to have nearly blown up the world's financial system. For such a near-catastrophic event, the finance profession has precious little information to draw from. By piecing together publicly available information, this paper by Philippe Jorion draws lessons from risk management practices at LTCM.
A report from the Senior Supervisors Group (SSG) that assesses which risk management practices worked well, and which did not, at a sample of major global financial services organizations during the recent period of market turmoil.
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This 2005 Presentation was given by Dr Lars Jaeger at ETHZ in Zurich.
The Risk Management Lab acts as the umbrella for all research on risk within Tanaka Business School's Finance and Accounting Group. It is headed by Professor William Perraudin.
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