Challenges in Modern Interest Rate Modeling
Financial markets have seen the emergence of negative interest rates in multiple currencies during the last couple of years. This development requires new modeling standards that allow for negative rates and at the same time implement well-established features of modern interest rate modeling, such as stochastic volatility. This workshop details the theoretical foundations and practical implications of the new modeling approaches.
The focal point of the first sessions will be the well-known SABR model with an emphasis on its extension to negative rates. We then discuss a modern interpretation of the classic Hull-White model and its implementation within the LIBOR Market model. Moreover, we make an excursion to the challenges of valuing interest rate derivatives under funding and collateralization.
The course will complement theoretical parts with a comprehensive discussion of the implementation and include hands-on exercises sessions.
- Wednesday, April 6th, 2016. 8:30-17:30
- Thursday, April 7th, 2016. 08:30-17:30
- Friday, April 8th, 2016. 08:30-17:30 (Additional exercise sessions open to practitioners)
The workshop takes place at
quantLab - Room B 121
LMU Institute of Mathematics
A detailed location plan can be found here.
|Morning Session 1||08:30 - 10:00|
|Morning Session 2||10:30 - 12:00|
|Afternoon Session 1||14:00 - 15:30|
|Afternoon Session 2||16:00 - 17:30|
- Stochastic Volatility Modeling and the SABR model
- A short history of SABR
- SABR approximation formulas
- Integration, PDE and efficient schemes
- Stochastic volatility modeling in negative interest rate regimes
- Negative interest rates and funding
- The LIBOR Market model - modeling negative rates
- A Hull-White parametrization of the LMM
- Lognormal vs. normal volatility
- Valuation of interest rate derivatives under funding and collateralization: Bond Forwards and Total Return Swap
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. Jörg Kienitz
Markus Meister has more than 10 years experience as a front office quant for interest rates. Prior to joining Zinnegger Financial Risk Management Consulting GmbH in 2015, he worked eight years at Deutsche Bank as a VP in London and Frankfurt and as a Fixed Income Analyst at Millennium Capital Partners on curve building, smile modeling, money market indices and relative value trading.
He holds a Master of Business Administration and Industrial Engineering from Karlsruhe Institute of Technology and a Certificate of Quantitative Finance. He is the author of Smile Modeling in the LIBOR Market Model.
Dr. Mark Lichtner
Mark Lichtner works as a Quantitative Analyst / Model Developer for DZ Bank AG since 2012. From 2010-2012 he worked in a similar role for Talanx Asset Management. 2006-2010 he worked as a postdoctoral researcher at Weierstrass Institute for Applied Analysis and Stochastics in Berlin in the area of infinite dimensional dynamical systems, modelling and simulation of high power lasers. 2006 he obtained a phd in applied analysis from Humboldt University Berlin.
The payment of a workshop fee is required, according to the following table:
|No. of Days||Practitioner Rate||Academic Rate *|
(*) Academics (post-graduate students, professors, etc.) must present proof of their academic affiliation (e.g. valid University Badge)
Note: The workshop is offered at a competitive price and will not include any catering (coffee, tea, lunch or dinner). However, located in Munich's "Maxvorstadt", corresponding locations are in short walking distance from the venue.
For registration please contact the Secretary of the Workgroup in Financial Mathematics via email@example.com.