MathFinance News

Invitation to the Press Conference: Presentation of the survey on „Volatility as Investment“

Volatility is a risk measure and at the same time an alternative source of return. The volatility product market has becomes liquid even in times after the Lehman collapse and the Euro crisis. Moreover, investors discover the added value of volatility strategies in a portfolio context. Since combinations of volatility products are typically negatively correlated to an equity portfolio they can substantially improve the risk-return profiles.

The results of the new joint research analysis of Uwe Wystup, managing director of MathFinance and Honorary professor of Quantitative Finance at Frankfurt School of Finance & Management and Lupus alpha will be released in a press conference on

Tuesday, 24 January 2012, 10:00 – 12:00 a.m.
in the Lupus alpha office in Frankfurt‘s Westhafen,
Speicherstrasse 49 – 51, 60327 Frankfurt am Main.

Prof. Dr. Uwe Wystup will present the results of the paper on „Volatility as Investment“: How can volatility be viewed as an asset class? How can you invest in volatility? How do volatility strategies perform in different market scenarios? How do they help diversify the portfolio risk and increase the return? Afterwards, Alexander Raviol, Head of Absolute Return Strategies at Lupus alpha, will talk about his practical experience in volatility management.

After the presentations the teams of Lupus alpha and MathFinance will be available for questions and a detailed discussion.

We would be delighted to welcome journalists and media representatives at the press conference.
Please inform annett.haubold@lupusalpha.de by January 18 2012, if you wish to join or would like detailed information about the research.
Note that the presentations will be in German.

The conference is intended for practitioners in the areas of trading, quantitative or derivative research and risk and asset management as well as for academics studying or researching in the field of financial mathematics or finance in general. The talks during the two days of the conference cover a broad range of current topics and are presented by internationally known academics and practitioners. There will be enough time for questions and discussions after each talk and additional breaks provide you the opportunity to build networks within the quantitative finance community.

Some of the speakers of this year include: Prof. Jin-Chuan Duan, Dr. Alexander Langnau, Professor Dr. Ekkehard Sachs, Dr. Attilio Meucci, Prof. Dr. Cornelis Oosterlee, Professor Roger Lee, Dr. Owen Matthews, Saeed Amen, Peter Austing, Erik Vynckier and many others.

Some of this year's sponsors include: Commerzbank,  Murex, d-fine, LPA, PricingPartners, fintegral, Reuters and many others!

Registration is now open!

Course Instructor

Course Details

MathFinance (Asia) presents its Independent Model Validation Services

The FX Options market has taken a clear trend to LSV models in last few years. While top tier banks have developed their own versions of LSV, Murex is the first software vendor to provide an LSV model working on the portfolio level in their risk management system.

The MathFinance team has implemented the pricing tool for first generation exotics on its own systems and generated automated pricing verification using both Monte Carlo and a PDE based approach. For example, the graph below shows the differences between Murex and MathFinance prices for a large set of touch options in various currency pairs. A detailed validation report is available from Murex.

Singapore’s new financial district on the harbor front

Banks in Asia are looking to upgrade their models and risk management tools. MathFinance can help in all questions around modeling, validation, derivatives workflow, choosing suitable software and partners to boost up their FX Options business.

Charles Brown (MathFinance) and Clément Lebreton (Murex) discussing  tradability and distribution.

A live presentation of the validation will be presented on Nov 16 at the Global Derivatives Conference in Chicago.

Talk on Tremor

Uwe Wystup will talk about the validation of "Tremor", the Local-Stochastic Volatility model by Murex on the Global Derivatives USA Conference, 14-17 November 2011 in Chicago.
For more details, please click here.

Unifying exotic option closed formulas

Authors

Carlos Veiga · Uwe Wystup · Manuel L. Esquível

Abstract

This paper aims to unify exotic option closed formulas by generalizing a large class of existing formulas and by setting a framework that allows for further generalizations. The formula presented covers options from the plain vanilla to most, if not all, mountain range exotic options and is developed in a multi-asset, multi-currency Black–Scholes model with time dependent parameters. It particular, it focuses on payoffs that depend on the distributions of the underlyings prices at multiple but set time horizons. The general formula not only covers existing cases but also enables the combination of diverse features from different types of exotic options. It also creates implicitly a language to describe payoffs that can be used in industrial applications to decouple the functions of payoff definition from pricing functions. Examples of several exotic options are presented, benchmarking the closed formulas’ performance against Monte Carlo simulations. Results show a consistent over performance of the closed formula reducing calculation time by double digit factors.

MathFinance validates Murex’ Tremor LSV model, Risk Magazine Oct 2011

Over the past 20 years, financial modelling increased in complexity to better describe complex market behaviors and allow market-makers to stay competitive in a maturing world. This maturity led, for example, to the proper handling of volatility surfaces many years ago and, more recently, to the management of relations between spot and volatility levels, between credit and equity markets or even simply to the development of robust interpolation methods that do not break in extreme market conditions.

MathFinance implemented a Monte Carlo and PDE-finite difference version of the valuation for FX first generation exotics and confirms that Murex uses the model correctly.

Read more

New Research

Uwe Wystup presents initial research on Currency Exchange Option in Long Term Roll-Over Loans at the Thalesians, Canary Wharf, London on Wednesday Oct 12 2011 7:30pm.

Details: www.thalesians.com

We are now also registered in London!

MathFinance Conference

The 12^th Frankfurt MathFinance Conference will take place on the 26^th and 27^th March 2012.

MathFinance is associated partner in the MC-ITN Initial Training Networks (ITN) program sponsored by the European Commision.

Together with several universities including Bergische Universität Wuppertal, Vienna Technical University, Technische Universiteit Delft, University of Greenwich, University of Oxford, University of Belgrade, Universidad Politecnica de Valencia, Univerzita Komenskeho v Bratislave and several other industry partners, the project scored 80.6%.

The purpose of the program is provide funds for young researchers aiming to do a Ph.D. and provide training and networking opportunities with the financial industry.

MathFinance joins IFF Riester term sheet committee

The German Federal Ministry of Finance has decided to equip retail investors with a termsheet (Produktinformationblatt PIB) explaining the details, costs, chances and risks involved when signing up for a retirement provision plan (Riesterrente or Rüruprente). The IFF (Institut für Finanzdiensleistungen) in Hamburg has invited a committee of experts in the fields to discuss how to present return and risk figures graphically in a consumer friendly way.
The meeting on 16 August 2011 included representatives of ZEW (Center for European Economic Research), ITA (Institut für Transparenz in der Altersvorsorge), Morgen&Morgen and Mathconcepts.

The MathFinance team illustrated the benefit of simulation to provide the investor with visible information about guarantees, the distribution of the capital saved when retired depending on future developments of capital markets.
We strongly encourage the initiative of the ministry and are looking forward to see the proposal of IFF how to proceed.

Fx Options Course

Uwe Wystup's course on FX Options and Structured Products will run the first time in New York on Sept 12-14 2011.

The course is structured on a Problem/Solution approach, that will give you insight on the most asked questions:

1. How are all the exotic options related?
2. How to replicate a transatlantic barrier?
3. How to construct digitals using vanillas and its implication of pricing digitals with smile?
4. How to use a risk reversal to replicate a Regular-Knock-Out?
5. How does this help to understand forward skew risk?

These relationships are illustrated on our exotics pedigree showing an overview of the most important FX exotic options.

See pedigree

IcyFx extension

Our development team extended and improved the IcyFx Pricing Tool, by implementing direct access to the Reuters and Bloomberg RICS through the authorized corresponding APIs.

New Research Paper

The paper by Manuel L. Esquivel (Universidade Nova de Lisboa), Carlos Veiga (Barclays) and Uwe Wystup on "Unification of Closed Formulas for a Class of Exotic Options" has been accepted for publication in Review of Derivatives Research.

A first version is available as a research paper here.

MathFinance completes the validation of Murex’ Tremor model

We are proud to announce that we completed our first independent model validation report of the implementation of Murex’ hybrid stochastic-local volatility Tremor model. We checked hundreds of values and Greeks of vanilla and first generation exotic options using a Monte Carlo engine. The implementation by Murex is based on the finite difference method of the model partial differential equation. The calibration of the model parameters is done by Murex.

See slides 

A detailed report is available upon request.
We offer extended independent validation services, please contact us.

MathFinance contributes to new Springer book!

MathFinance contributes to new Springer book “Statistical Tools for Finance and Insurance, Second Edition” Edited by Pavel Cizek, Wolfgang Karl Härdle and Rafal Weron.

The two sections of this new volume we contributed are about FX smile in the Heston model (Agnieszka Janek, Tino Kluge, Rafał Weron, and Uwe Wystup)and Return distributions of equity-linked retirement plans (Nils Detering, Andreas Weber, and Uwe Wystup)

See page
Appeared in June 2011.

MathFinance Research on Long-term investment plans with different guarantee models has been presented on The 2nd BRBZ Conference in Cologne:

Abstract

We consider a savings plan, where the paid capital is guaranteed at time of retirement, in the Ger- many market available as Riester-Rente and supported by federal bonus payments and tax benefits. In our work we compare different capital guarantee mechanisms: the return distribution of a classical insurance strategy with investments in the actuarial reserve fund, a CPPI strategies, and a stop loss strategy, in optimistic, standard and pessimistic market scenarios. To model the distribution we use a jump diffusion model parameterized to resemble the MSCI World index. We also analyze how fee structures and gap risk affects the performance of these savings plans.

BRBZ-Rechtsberatungskongress zur betrieblichen Altersversorgung 2011 See site 

See slides in German 

See two-page summary in German

New Research

IIM Shillong & MathFinance on a collaborative course of action

Convocation 2011 of the Indian Institute of Management Shillong witnessed an increase in its repertoire of medallions generally bestowed upon outstanding students of each passing out batch. This year, the Annual MathFinance AG Medallion for the Best Quantitative Finance Student was instituted for the first time in the history of the Institute’s progress as a Centre of Excellence, thanks to the collaborative effort between Prof AK Dutta, founding Director of the seventh IIM in India and Prof Uwe Wystup founder and Managing Director of MathFinance and also a Professor at the Frankfurt School of Finance & Business and Carnegie Mellon University who had donated his personal proceedings from the program titled Foreign Exchange Options “Pricing, Hedging and Applying Exotics and Structured Products” initiated by IIM Shillong, which was held at Mumbai in the month of October, last. An endowment account out of the proceedings was opened by IIM Shillong out of which Hitesh Gulati became the first ever recipient of the Annual MathFinance AG Medallion for the Best Quantitative Finance Student.

Deutsche Bank on trial

Commentary by Uwe Wystup, Managing Director of MathFinance.

This recent judgment brings up the question how financial service providers and their clients should interact in their business. To my belief, both parties have a job to do. Clearly, a bank as Deutsche in this case should do a much better job informing clients about the risks in the products they trade. If all risks are clearly stated and their potential losses or damages including worst cases are clearly demonstrated and the client wishes to engage in the product anyway, then I see no reason why a bet like this one should not take place. On the other hand clients are strongly advised to invest only in products whose chances and risks they fully understand.
Our team can help explaining the risk before the trade happens and also act as expert witness in litigation if the damage has already happened.
A recent trial at the Royal British court had been decided in our client’s favor based on our portfolio analysis.

Read article...

The Indian Institute of Management- Shillong (IIM-Shillong) is one of the leaders in the field of management education in India. On the 28th of March it organized its 2nd Convocation for the PGP Batch of 2011. The batch comprised of 66 students who were awarded certificates at the institute's second convocation.

During the ceremony, MathFinance AG awarded the gold medal to the best quant student at the convocation.

Read full article...

Awards

Germany’s federal foundation “Stiftung EVZ” has been awarded the top ranks „Best Foundation“ and „Best Portfolio Structure“ by Portfolio Institutionell!

Press Article
Awards Page 

Stiftung EVZ is working closely with MathFinance, Uwe Wystup being a part of the foundation’s Asset Management Advisory Committee since 2008.

Read more...

Our annual MathFinance Conference in the Frankfurt Fair Tower was attended by more than 150 quants worldwide. 25 speakers and 11 sponsors presented recent advances in quantitative finance.

First results on the validation of the Tremor stochastic-local volatility hybrid model are presented at the MathFinance Conference.

MathFinance launches a new web page.

- Uwe Wystup holds the first FX Options course in India. Press release (English)

- MathFinance supports BRBZ at the expert commission "Product". Press release (German)