Neural Networks: Pricing Bermudan Swaptions
The future CFs of a Bermudan swaption trade are determined by 1) the T&Cs contained in the trade’s term sheet…
Charlie Browne
Interest Rate Risk in the Banking Book (IRRBB)
The profitability of a bank is determined by the behaviour of its future expected cash flows. The BB contains held-to-maturity…
Fitting Risk Factors for FX Heston
Risk factors used in derivative pricing models come in two forms: observable and fitted. On the RH side of the…
Cap Valuation
A company borrows $100m from a bank. It’s a floating rate loan tied to SOFR, the risk-free rate (RFR) index…
Counterparty Credit Risk
Counterparty credit risk is a fusion of market risk with credit risk. The unrealised P&L of an interest rate derivative…
Part 1: Nature’s Natural Number
If you are lucky enough to get 100% interest on an investment of $1 over 1 yr, you will get…
Short Rate & Forward Rate Models
A bond is a loan. It has future CFs: its coupons, and the loan repayment. Each future CF has a…
The Data Science Underlying Quant Finance
When financial markets first emerged, the data they created became the basis for QF. Prices from different markets exhibited patterns…
The FRTB SA Formula
In statistics, the variance of two variables X and Y, say people’s height and weight, can be summed to get…