Monte Carlo simulation
Automatic differentiation for diffusion operator integral variance reduction
This paper demonstrates applications of automatic differentiation with nested dual numbers in the diffusion operator integral variance-reduction framework originally proposed by Heath and Platen.
Efficient simulation of affine forward variance models
Andersen's quadratic-exponential scheme is used for simulations of rough volatility models
Estimating future value-at-risk from value samples, and applications to future initial margin
This paper discusses several methods to estimate fVaR or margin requirements and their expected time evolution, from simple options to more complex interest swaps.
Branching diffusions with jumps, and valuation with systemic counterparties
This paper extends the branching diffusion Monte Carlo method of Henry-Labordère et al to the case of parabolic partial differential equations with mixed local–nonlocal analytic nonlinearities.
Deutsche’s market RWAs hit 5-year low on VAR multiplier cut
Regulatory audit greenlit 0.5x cut in multiplier following bank’s overhaul of VAR approach
The impact of compounding on bond pricing with alternative reference rates
This paper looks at the impact of compounding on zero-coupon bond prices by considering the short rate when it follows a Gaussian diffusion process or a stochastic volatility jump-diffusion process.
A pricing model with dynamic credit rating transition matrixes
This paper incorporates a stochastic credit rating transition matrix into the Acharya–Das–Sundaram model and implements a simulation based pricing method
Deep learning profit and loss
The P&L distribution of a complex derivatives portfolio is computed via deep learning
Show your workings: lenders push to demystify AI models
Machine learning could help with loan decisions – but only if banks can explain how it works. And that’s not easy
Deep XVAs and the promise of super-fast pricing
Intelligent robots can value complex derivatives in minutes rather than hours
Fake data can help backtesters, up to a point
Synthetic data made with machine learning will struggle to capture the caprice of financial markets
In fake data, quants see a fix for backtesting
Traditionally quants have learnt to pick data apart. Soon they might spend more time making it up
Most EU banks use historical simulation approach to VAR
Few lenders favour Monte Carlo or parametric methodologies
Model change pumps up Deutsche’s VAR capital charge
Switch to historical simulation approach increases requirement by 71%
Deutsche Börse eyes quantum computing
Pilot application to model enterprise risks cuts computation time from 10 years to 30 minutes
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
Solving final value problems with deep learning
Pricing vanilla and exotic options with a deep learning approach for PDEs
Numerical techniques for the Heston collocated volatility model
In this paper, the authors discuss all aspects of derivative pricing under the Heston–CLV model: calibration with an efficient Fourier method; a Monte Carlo simulation with second-order convergence; and accurate partial differential equation pricing…
Bank leverage and capital bias adjustment through the macroeconomic cycle
The author assesses the quantitative effects of the recent proposal for more robust bank capital adequacy.
Ice tees up CDS options launch for November 9
Fight for CDS market share heats up as Ice begins clearing options and LCH preps CDX offering
Science friction: some tire of waiting for quantum’s leap
Use cases for new tech are piling up – from CVA to VAR. But so are the obstacles
Danske quants discover speedier way to crunch XVAs
Differential machine learning produces results “thousands of times faster and with similar accuracy”
Dutch banks seek quantum edge for stress tests
ABN, ING and Rabobank working together; US quantum developer seeks patent for CCAR
Differential machine learning: the shape of things to come
A derivative pricing approximation method using neural networks and AAD speeds up calculations