Learning Curve

A perennial problem in software development is how to access common algorithms--analytical models for derivative pricing and risk management sensitivities--when working on different systems without re-inventing the wheel every time.

What information about a counterparty's default probability is determined by their stock price?

A company's decision to hedge, and its choice of the most suitable instrument represent the penultimate step in an integrated risk management process.

Credit risk is the potential mark-to-market loss, at a chosen probability level, caused by a change in the counterpartys' credit quality.

In January, banks in the U.S. became subject to new capital requirements for market risk arising from trading activities. These requirements are notable because the capital charge is based on banks' internal value-at-risk models.

A flexi-cap gives the holder the right to cap some but not all the period rates at a specified strike level over a given time span.

The German pfandbrief--morgage bond--market shows a significantly divergent behaviour over the bund or swap market.

Following the introduction of the new market risk capital requirements recommended by the Basle Committee, this article will address some concerns raised about the methods of calculating the capital charges.

In this issue, Johan G.B. Beumée, a partner in Riskcare Limited, and Paul Wilmott, professor of mathematics from Imperial College London, present some approximations of the warrant pricing method introduced in a previous Learning Curve (DW 1/12).

Options are prevalent in the world of finance and serve many functions.

Modeling the term structure of interest rates has always been linked with complex probability theory and technical jargon that can act as a deterrent to exploring the world of derivative pricing.

In common with many currencies, the Mexican peso used to be pegged to the dollar.