Risk 1 - Hans Buehler
Risk 1 - Hans Buehler
Risk 1 - Hans Buehler
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Contents<br />
Challenges in Equity Modelling<br />
• Deterministic<br />
— Implied Volatility<br />
— Interest rates<br />
— Dividend marks and handling<br />
(proportional vs. discrete)<br />
— FX Volatilities<br />
— Equity Correlation<br />
— Equity/FX Correlation<br />
— Repo, borrow, basis, etc<br />
• First Order<br />
— Local Volatility<br />
— CDS/Credit risk<br />
• Second Order<br />
— Stochastic Volatility / Jumps<br />
— Stochastic Dividends<br />
— Stochastic Interest rates<br />
— Equity/IR correlation<br />
• Third Order<br />
— Stochastic Correlation<br />
— Stochastic Credit <strong>Risk</strong><br />
— Equity/Credit ―correlation‖<br />
• Fourth Order<br />
— Transaction Costs, Liqudity<br />
— Forward curve models<br />
3
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