There is still no standard interest rate model suitable for all kind of interest rate products and markets. This makes it particularly important to have knowledge on a broad range of models used in practise. The workshop aims at presenting a survey on popular models used in the industry (ranging from short rate models to LIBOR market models). Further, a particularly suitable 2-factor-Hull-White-model concept will be presented that sets up a generic pricing framework for a wide range of exotic and standard products and allows for simple calibration.
Key features:
• Concise introduction to a wide range of interest rate models
• Presents pricing methodology for numerous interest rate products
• Sets up a complete, generic pricing framework including software demonstration
• Application oriented and pedagogical presentation
|
TIME |
TOPIC |
Presenter |
|
DAY 1 PROGRAMME |
|
9.00 |
REGISTRATION AND COFFEE |
|
9.15 |
Ice Breaker session |
|
9.30 |
1. Interest rate modelling: Popular models, simple products, and further aspects – Part I
- Introduction (Technical terms, basic properties, yield curve fitting)
- Short rate modelling (Popular one-factor models (Vasicek, CIR, Hull-White, …), general factor approach)
|
Prof. Dr. Ralf Korn |
10.30 |
COFFEE BREAK |
|
11.00 |
2. Interest rate modelling: Popular models, simple products, and further aspects – Part II
- Calibration aspects
- Forward rate approach (HJM framework, Cheyette model)
- Further aspects
|
Prof. Dr. Ralf Korn |
12.30 |
LUNCH |
|
13:30 |
3. Aspects of the 2-Factor-Hull-White Model
- Introduction (Form and properties)
- Closed formulas for caps/floors and swaption prices
- Calibration
- Numerical methods
|
Prof. Dr. Ralf Korn / NN |
14.45 |
TEA BREAK |
|
15:15 |
4. Generic Pricing of Structured Interest Rate Products in a 2-Factor-Hull-White Framework
- Generic description of the floating coupon
- Call/put options and path-dependent products
- Software concept and demonstration
|
Prof. Dr. Ralf Korn / NN |
16.00 |
Discussion and Feedback |
|
|
DAY 2 PROGRAMME |
|
| 9.30 |
Introduction and Review of Day 1 |
|
| 9.45 |
Presentation 1 – Fraunhofer ITWM |
|
9.45 |
1. Aspects of the LIBOR Model and Pricing of Some Exotic Products in Practise – Part 1
- Why LIBOR ?
- Basic properties (Definitions, dynamics, closed pricing formulas)
- Factor reduction and calibration
|
Dr. Georgi Dimitroff |
| 10.45 |
Coffee |
|
11.15 |
2. Aspects of the LIBOR Model and Pricing of Some Exotic Products in Practise – Part 2
- Multiple exercise products and pricing with the Longstaff-Schwartz method
|
Dr. Georgi Dimitroff |
| 12.15 |
Discussion Session |
|
| 12.30 |
Lunch |
|
| 13.30 |
Pricing and Calibration of Rational Lévy Interest Rate Models
Within the "positive interest" term structure framework, a new class of models driven by a range of Lévy processes are introduced. The models lead to analytically tractable expressions for the prices of options, swaptions, and their associated deltas. The models are calibrated against market data, and this is used to determine market implied short rate and risk premium processes. |
Professor
Dorje C. Brody
Brunel University |
| 14:30 |
Tea |
|
| 14:45 |
Pricing and Calibration of Rational Lévy Interest Rate Models (continued) |
Professor
Dorje C. Brody
Brunel University |
| 15.30 |
Discussion Session |
|
| 16.00 |
Tea and close. |
|
|
Prof. Dr. Ralf Korn, University Kaiserslautern, Fraunhofer Institute for Industrial Mathematics Kaiserslautern
Ralf Korn is Professor of Financial Mathematics at the Univ. Kaiserslautern (Germany). He is also heading the Financial Mathematics group at the Fraunhofer Institute for Industrial Mathematics ITWM in Kaiserslautern which collaborates in numerous projects with the finance and the insurance industry. He has written five books (the most recent one on “Monte Carlo Methods and Models in Finance and Insurance”) and has published over 50 papers in refereed journals.
Dr. Georgi Dimitroff works as research scientist at the Fraunhofer Institute for Industrial Mathematics in Kaiserslautern, Germany since 2008. There he is responsible for projects in option pricing and interest rate derivatives valuation and works on problems in stochastic analysis. Research and project partners are among others large banks and insurance companies as well as asset management companies and leading German Universities. He received his PhD in Mathematics from the Technical University in Berlin, Germany. Prior to this he received his MSc in Financial Mathematics from the University of Kaiserslautern.
Professor Dorje C. Brody holds a Chair in Mathematics at Brunel University. He was born in Hong Kong, and later lived in Japan for a number of years where he obtained his BSc in physics at the University of Niigata. He received his MSc and PhD degrees in theoretical physics from Imperial College, and subse-quently held a research appointment in the Department of Applied Mathematics in Cambridge University, which he held in conjunction with a Research Fellowship at Churchill College. He returned to Imperial as a Royal Society University Research Fellow, followed by an appointment as Reader in Mathematics. He moved to Brunel in 2011. His research interest covers a wide range of topics in applied mathematics. He is the author of "Modern Mathematical Theory of Finance" and “Financial Engineering for Businessman” both published in Tokyo, and has also co-authored numerous papers on interest rate theory, credit deriva-tives, stochastic volatility, weather derivatives pricing, equity option pricing, asset allocation, statistical ar-bitrage, and reinsurance pricing.
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Industry Rate: 2 days £1025 + VAT
Thanks to our sponsors, there are a limited number of generous bursaries available for academics and research students so they can attend at the reduced rates of:
Academics: 2 days £275 + VAT
Research Students: 2 days £180 + VAT
For more information regarding bursaries, please contact us on + 44 (0) 1895 819 488 or email info@optirisk-systems.com
Discounted rates for group bookings can be also arranged on request.
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