INTEREST RATE MODELLING - Risk Waters Group

E MODELLINGmentation techniquesDAY TWOLondon, Friday 25 May 20018.30 Registration and breakfast9.00PRACTICAL EXAMINATION OF THEIMPLEMENTATION AND CALIBRATION OF THEMAIN MODELS USED IN FINANCIALINSTITUTIONS● Incorporating volatility skew and smiles in BGMLibor interest rate models● Importance of skew in pricing exotics● Theoretical foundations and hedging implications● Implementing a CEV BGM Libor model forBermudan swaptions● Introduction to the stochastic volatility BGM LibormodelStephen Dodds, Director of Research andDevelopmentBARCLAYS CAPITALDON10.30 Morning break11.00STOCHASTIC VOLATILITY; A PRACTICALAPPROACH● Stochastic BGM models● Using autocalibration to manage the smile risk ofexotic dealsDr Mark S. Joshi, Senior Quantitative AnalystROYAL BANK OF SCOTLAND12.30 Lunch13.45IMPLEMENTATION OF A STOCHASTIC BGMLIBOR MODEL● Review of the deterministic volatility BGM Libormodel● Motivating stochastic instantaneous volatility curves● The displaced-diffusion stochastic volatility BGMLibor model● Fast pricing of exotic options in a stochasticvolatility model- long stepping forward rates- fast and effective pseudo-square rooting ofcovariance matrices● Calibration- rapid production of the caplet volatility surface- instantaneous exact calibration to at-the moneycaplet prices- rapidly pricing at-the-money swaptions- instantaneous calibration to co-terminalswaptions● Examples- fits to the market caplet surfaces- pricing a trigger swapRiccardo Rebonato, Head of Group Market RiskROYAL BANK OF SCOTLANDThere will be a 30 minute break during this session17.00 End of coursePast delegates’ commentsHere are some of the commentsgiven by last year's satisfieddelegates:"Excellent!""Well paced and very clear. I likedthe combination of presentationsand original papers""Excellent selection of speakers andtopics, I was most impressed andwould recommend this course tocolleagues.""A great course, which provided theperfect balance between numericalexamples and pure theory. I wasvery satisfied"www.risktraining.com/interest