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Workshop on Stochastic Volatility and Multi-Curves

Theory, Modeling and Implementation.

02.04.2014 – 04.04.2014

Schedule

Part 1: Stochastic Volatility Modeling. Introduction and Numerical Methods.

  • Wednesday,  April 2, 2014. 09:00 - 17:30
  • Thursday, April 3, 2014. 09:00 - 17:30

Part 2: Multi-Curve Interest Rate Models with Stochastic Volatility

  • Friday, April 4, 2014. 09:00 - 17:30

Venue

The workshop takes place at

quantLab - Room B 121
LMU Institute of Mathematics
Theresienstr. 39
80333 Munich

A detailed location plan can be found here.

Contact

email@christian-fries.de

Tentative Schedule

Morning Session 1 9:00 - 10:30
Morning Session 2 11:00 - 12:30
Afternoon Session 1 14:00 - 15:30
Afternoon Session 2 * 16:00 - 17:30

(*) Each day is concluded with hands-on exercises and implementations.

Detailed Agenda

Day 1: (Presenter - Dr. Jörg Kienitz)

  1. Stochastic Volatility Models - Introduction, Markets and Models
    • What do we model?
    • Evidence from the market
    • Heston, SABR, Heston-Hull-White, Levy Models
  2. The Heston Model
    • The Heston Model in Detail
    • Heston SDE
    • Heston PDE (Application of Ito / Feynman-Kac)
    • Solving the Heston PDE
  3. Integration- and Transformation Methods I
    • Integration Methods for the Heston Model
      (Carr-Madan, Lewis, Lord-Kahl Optimization)
    • Option Pricing and Greeks
    • Optimization (Truncation and Transformation)
    • Transformation Methods (CONV, COS)
    • Option Pricing and Greeks

Day 2: (Presenter - Dr. Jörg Kienitz)

  1. Finite Differences - Introduction I
    • Simplifying the PDEs
    • PDE Example: The Heat Equation
    • Basic Schemes for Solving the Heat Equation Numerically
  2. Finite Differences - Introduction II
    • Stability and Consistency (Theory)
    • Finite Differences and Connection to Trees
  3. FDM for Heston and SABR
    • ADI for Heston
    • Hagan Approach to No-Arbitrage SABR
    • Andreasen-Huge Approach to ZABR

Day 3: (Presenters - Prof. Dr. Christian Fries / Dr. Alessandro Gnoatto)

  1. Multi-Curve: Introduction
    • Collateralization
    • Discount versus Forward Curves
    • Valuation with Collateralization
  2. Term Structure Interest Rate Modeling: The Classic LIBOR Market Model
    • Model Definition
    • Drift
    • Calibration to Swaptions
    • Stochastic Volatility Extensions
  3. Multi-Curve Modelling with Stochastic Volatility
    • A Simple Straight forward Multi-Curve Extension using Deterministic Basis
    • Modelling a Stochastic Basis
    • Model Definition
    • Calibration

Dr. Jörg Kienitz

Dr. Kienitz is the head of Quantitative Analysis at Deutsche Postbank AG. He is primarily involved in the developing and implementation of models for pricing of complex derivatives structures and for asset allocation. He is also lecturing at university level on advanced financial modelling and gives courses on "Applications of Monte Carlo Methods in Finance" and on other financial topics including Lévy processes and interest rate models. Jörg holds a Ph.D. in stochastic analysis and probability theory. He is a co-author of the book Monte Carlo frameworks: Building Customisable High performance C++ Applications, Wiley Finance, (2009).

Prof. Dr. Christian Fries

Christian Fries is head of model development at DZ Bank’s risk control and Professor for Applied Mathematical Finance at Department of Mathematics, LMU Munich.

His current research interests are hybrid interest rate models, Monte Carlo methods, and valuation under funding and counterparty risk. His papers and lecture notes may be downloaded from http://www.christian-fries.de/finmath

He is the author of “Mathematical Finance: Theory, Modeling, Implementation”, Wiley, 2007 and runs www.finmath.net.

Dr. Alessandro Gnoatto

Alessandro Gnoatto is a post-doctoral researcher with the Workgroup Financial Mathematics of LMU Munich. His current research interests include advanced asset pricing models based on matrix-valued affine processes and their various applications, e.g. to multiple-curve interest rate models.

He is an experienced lecturer on a broad range of topics from mathematical finance such as interest rate models, Lévy processes and Monte Carlo methods and is a contributor to finmath. Alessandro holds a Ph.D. in Computational Mathematics.

The payment of a workshop fee is required, according to the following table:

Package Practitioner Rate Academic Rate * No. of Days
Part 1  1500€   300€  2 Days
Part 2  800€   150€  1 Day
Part 1 & 2  1800€   400€  3 Days

(*) Academics (post-graduate students, professors, etc.) must present proof of their academic affiliation (e.g. valid University Badge).

Registration and Contact:

The workshop will take place in a computer equipped room with limited places. A registration for the workshop is required. Please register via email to the Secretariat of the Workgroup in Financial Mathematics sekrfin@math.lmu.de.