 |
Day 1: Interest Rate Modelling for the New Era by Pat Hagan |  |
|
 |
 |
Presenter: Pat Hagan: Head of Quantitative Analytics, Chief Investment Office, JP Morgan
09.00 – 10.30: Managing Smile Risks
- Basics: discount factors, FRAs, swaps, and other delta products
- Curve stripping, bucket deltas, and managing IR risks
- Martingales & the fundamental theorem
- Vanilla options (caps, floors, and swaptions) & martinga
- 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
- Levy based models for managing volatility surfaces
10.30 - 10.45 Break
10.45 – 12.30: Intermission: Market technicals
- Money vs. scrip
- Holiday calendars, business day rules, and schedule generation
- Day count fractions
- Ref rates & basis spreads
- Leverage, cost of funds, and the credit crisis
Managing exotic risks
- 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
- Summary
12.30 - 13.30 Lunch
13.30 – 15.15: Practical pricing of exotics
- LGM model
- Callable swaps (Bermudans)
- Calibration strategies and the selection of calibration instruments
- Connection between calibration instruments and vega risks
- Explicit calibrations for Bermudan
- Predicted vs. actual vol matrices for different calibrations
- Dependence of Bermudan price on choice of calibration instruments
- Dependence of hedges on calibration choices
- Conclusions
15.15 - 15.30 Break
15.30 – 17.15: Adjusters and risk migration
- Mis-hedging, mis-pricing, and the need for risk migrators
- Price sharpening via adjusters
- Example: Correcting a Bermudan calibrated to ATM swaptions
- Example: Correcting a Bermudan calibrated to caplets
Pricing/hedging callable range notes & accrual swaps
- Definition of the deal
- Mismatched payoffs & convexity corrections
- Using replication to price non-callable range notes
- LGM model and potential calibration strategies
- Potential mishedging of swaption or caplet risks
- Using internal adjusters to correct prices and hedges
Day 1: Interest Rate Modelling for the New Era by Pat Hagan | Day 2: Interest Rate Modelling: Back to Basics | Details: | download pdf
|
Day 2: Interest Rate Modelling: Back to Basics | |
|
|
|
09.00 - 11.00 Theory of Interest Rate Modelling: From Basics to New Interest Rate Models
Presenters:
Dr Dorje C Brody: Reader in Mathematical Finance, Imperial College London
Professor Lane P Hughston: Professor of Mathematical Finance, Imperial College London
1. Interest rate theory: past, present, and future
- Overview of interest rate theory
- Dynamic models for the short rate
- The Heath-Jarrow-Morton framework
- Pricing kernel methodology
- Dynamical models for risky assets
- The dynamics of discount bonds
- The volatility structure approach: pros and cons
- Pricing formulae for discount-bonds
- Asymptotic conditions on long-dated discount bonds
2. Calibration of the interest rate term structure
- Conditional variance representation for the pricing kernel
- Parametrisation and calibration of interest rate dynamics
- The role of the Wiener chaos expansion in interest-rate term-structure calibration
- Bond option pricing in Wiener-chaos models
3. Term-structure density approach
- Dynamics of the term-structure density
- Construction of admissible term-structure models
- New Levy-based interest-rate models
- Brownian, Gamma, and Variance-Gamma models
- Bond-option pricing in rational Levy models
11.00 - 11.15 Break
11.15 - 12.45 Revisiting CMS Spread Options (Cap, Floor, Digital, Range Accrual)
Presenter: Eric Benhamou: CEO, Pricing Partners
- Product description
- CMS Replication
- Presentation of the various approaches: Normal, Bi Lognormal, Bi-SABR with copula, Bi Heston with copula, and Hagan adjuster method
- Comparisons and price differences
- Fast computation of CMS Range accrual
- Real time calibration of SABR model
- Impact of the copula assumption
- Impact of multi curve construction
12.45 - 13.45 Lunch
13.45 - 15.15: Multiple Curves, One Price: New Approaches for Pricing & Hedging Interest Rate Derivatives Decoupling Forwarding and Discounting Yield Curves
Presenter: Marco Bianchetti: Risk Management – Market Risk – Pricing & Financial Modelling, Intesa SanPaolo Bank
Market Context and Practices:
- Pre-Credit Crunch Single-Curve Framework
- Post-Credit Crunch Multiple-Curve Framework
- No Arbitrage and Forward Basis
Foreign-Currency Analogy, No Arbitrage and Quanto Adjustment:
- Single Currency Spot and Forward Exchange Rates
- Quanto Adjustment
- Pricing & Hedging FRAs, Swaps, Caps/Floors/Swaptions
No Arbitrage and Counterparty Risk
Other Approaches:
- Multi-Curve Market Model Approach
- Axiomatic Approach
- Counterparty Risk Approach
15.15 - 15.30 Break
15.30 - 17.00 Bases between Rates and Implications on Curve Construction and Pricing
Presenter: Jochen Theis: Director, Markit
- Bullets to follow
Day 1: Interest Rate Modelling for the New Era by Pat Hagan | Day 2: Interest Rate Modelling: Back to Basics | Details: | download pdf
|
Details: | |
|
|
|
Location:
The Marylebone Hotel
47 Welbeck Street
London W1G 8DN
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.
Day 1: Interest Rate Modelling for the New Era by Pat Hagan | Day 2: Interest Rate Modelling: Back to Basics | Details: | download pdf