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Workshop on Stochastic Volatility and Multi-Curves

Introduction, Numerical Methods and Application in Multi-Curve Interest Rate Models

02.04.2014 – 04.04.2014

Workshop on


Stochastic Volatility and Multi-Curves

Lecturers: Dr. Jörg Kienitz, Prof. Dr. Christian Fries, Dr. Alessandro Gnoatto

Dates:

  • PART 1: 2-3 April, 2014
    • Stochastic Volatility Modeling: Introduction and Numerical Methods by Dr. Jörg Kienitz
  • PART 2: 4 April, 2014

    • Multi-Curve Interest Rate Models with Stochastic Volatility by Prof. Dr. Christian Fries and Dr. Alessandro Gnoatto

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.

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

Location: The workshop takes place at „quantLab” which is located in Room B 121 LMU Institute of Mathematics, Theresienstr. 39, 80333, Munich
(how to find us).

Workshop Fee: 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.