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The goal of this two-day seminar is to give a detailed overview and insights into the latest techniques of modelling uncertainty in financial markets as well as showing computational methods to tackle the models.
We show Monte Carlo simulation as well as semi-analytical methods based on Fourier transforms. The latter techniques are suitable for efficient calibration of the underlying models.
We explain the whole work-cycle for successfully handling derivatives within the above framework including market data, calibration, simulation, pricing, hedging and risk management.
Overview of Course:
This seminar discusses the most important issues that need to be addressed when we price and hedge options within Non-Gaussian process based frameworks using Monte Carlo and Fourier transform methods:
- Stochastic Movement; From diffusions to (time changed) Lévy processes
- One-factor and multi-factor options
- Market data
- Calibration
- Mathematical tools; Monte Carlo and Fourier transform methods
- Calculating sensitivities (Greeks)
We propose some of the most powerful models and propose efficient methods for the implementation and we discuss why they work, why some other methods are not optimal and we compare our results with other modelling approaches such as Stochastic Volatility Models.
What do you learn?
We see this seminar as an ideal way to get a detailed overview of the latest development in financial modelling based on Non-Gaussian processes. We cover the following topics:
- Why needing Non-Gaussian models
- Where to get started with such models
- Properties of models based on Stochastic Volatility and / or Lévy processes
- Mathematical treatment of plain vanilla and exotic options
- Computational and coding issues
In short, we propose that this seminar will kick-start the process of becoming acquainted with financial modelling using Stochastic Volatility and Lévy processes.
Presenter:
JOERG KIENITZ is the Head of Quantitative Analysis at Deutsche Postbank AG. He is primarily involved in the developing and implementation of models for pricing of complex derivatives structures and for asset allocation. He is also lecturing at university level, Universities of Oxford, Bonn and Duisburg on advanced financial modelling and gives courses on Applications of Monte Carlo Methods in Finance and on other financial topics including Lévy processes and interest rate models as well as lecturing on finance conferences.
Joerg holds a Ph.D. in stochastic analysis and probability theory. He has authored several papers on mathematical and computational finance. He also is the co-author of the book Monte Carlo Object Oriented Frameworks in C++ (together with Daniel J. Duffy) which is published by Wiley.
All delegates will receive a complimentary copy of the Wiley 2009 publication:
Monte Carlo Frameworks: Building Customisable High-performance C++ Applications by Daniel J. Duffy & Joerg Kienitz.Topics covered: | Past Course Testimonials: | Day 1: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Day 2: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Details: | download pdf
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Quantitative Development, Barclays Capital:
"Your course was very interesting and useful, and I think you managed to present a large amount of information in a clear way."
Quantitative Research, Nordea Markets:
"...overall there was a good balance between the number of topics covered and the time spent on each...I'm only a bit annoyed that I didn't attend both days."
Topics covered: | Past Course Testimonials: | Day 1: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Day 2: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Details: | download pdf
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Day 1: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | |
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Market Data and the need for Non-Gaussian Models
- The Volatility Smile
- Higher Moments
- Historical Distributions
- Applications of Non-Gaussian Models: Asset Allocation, Pricing, Simulation
Fundamental Theory Stochastic Processes in Quantitative Finance
- Stochastic Movement; Diffusions, Jump-Diffusions, Pure-Jump Processes
- Stochastic Volatility
- Financial Models
Mathematical Setup and Models based on Non-Gaussian Processes
- Mathematical Setup
- Characteristic Functions
- Lévy Measure
- Lévy-Khinchtine Theorem
- Random Variables and Modelling of Financial Markets
Models based on Non-Gaussian Processes
- Geometric Brownian motion
- Merton jump diffusion model
- Variance Gamma model
- Normal Inverse Gaussian model
- Distributional and path properties
Pricing Vanilla Options and Calibration
- Pricing Vanilla Options
- Pricing options using FFT methods
- Carr-Madan method
- Cosine Method
- Calibration to Vanilla Options
- Using FFT for calibration
- Objective functions
- Local Optimization
- Global Optimization
Day schedule: 09:00 17:00
Break: 10:30 10:45
Lunch: 12:30 13:30
Break: 15:15 15:30
Topics covered: | Past Course Testimonials: | Day 1: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Day 2: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Details: | download pdf
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Day 2: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | |
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Stochastic Volatility Models
- Stochastic clocks and volatility
- The CIR Clock
- The Gamma Ornstein-Uhlenbeck (GOU)Clock
- The Variance Gamma CIR / GOU models
- The NIG CIR / GOU models
- The Heston stochastic volatility model
- The Bates stochastic volatility model
Pricing Exotic Options using Monte Carlo Simulation
- Monte Carlo methods for option pricing
- Setting up Monte Carlo simulation
- Schemes for VG model
- Schemes for NIG model
- Schemes for GOU clock
- Schemes for CIR clock
- Computing the Greeks
Pricing Forward Starting Options
- The forward characteristic function
- Comparing results using FFT and MC
Multidimensional Models and Asset Allocation using CVaR
- The multidimensional VG model
- The multidimensional NIG model
- Expected maximum likelihood estimation of Model Parameters
Greeks and American Options
- Using FFT to price American Options
- Using Monte Carlo to price American Options
- Calculating Greeks using Monte Carlo Methods
Implementation Issues From Algorithms to Code
- Choosing a language (VBA, Matlab, C++, C#)
- Designing algorithms
- Demo of running software for calibration and pricing
We will illustrate the models using Excel and Matlab code. Some of the Matlab code can be compiled to a dll. This dll can than be used within Excel.
Day schedule: 09:00 17:00
Break: 10:30 10:45
Lunch: 12:30 13:30
Break: 15:15 15:30
Topics covered: | Past Course Testimonials: | Day 1: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Day 2: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Details: | download pdf
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Details: | |
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Location:
Melia White House Hotel
Albany Street
Regents Park
London NW1 3UP
Hotel Website
Flight details:
All delegates flying into London on the morning of the event are reminded that they should arrive 30 minutes before 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.
Complimentary inbound transfer service:
WBS Training now extend our premium service to all our clients. This includes a complimentary inbound transfer from London airports to central London hotels for all workshops. If you require this service simply inform us up to 2 working days prior to your arrival (flight number, arrival time, airport and hotel destination) and we will arrange a complimentary pick up. You will be given a phone number to call on arrival and will be greeted at the airport by our partner taxi company.
Sponsorship:
World Business strategies Ltd, offer sponsorship opportunities for all events, E-mail headers and the web site. Contact Sponsorship: +44 (0) 1273 674400
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.
Topics covered: | Past Course Testimonials: | Day 1: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Day 2: Advanced Financial Mathematical Methods Stochastic Volatility and Exponential Lévy Models | Details: | download pdf