Research Project 6

RP6. Methods for modelling and calibrating to volatility surfaces for interest rates, equities, credit, and foreign exchange. (Camilla Pisani)

Leading Partner: Aarhus School of Business. Supervisor: Prof. Peter Jørgensen

The ESR in this RP aims to develop and implement new approaches for modelling equities, interest rates, credit risk, and the FX in particular the dynamics of the related volatility surfaces. This RP aims to develop methods for direct identification of parameters using both option and time series data. The results of this RP are usable in RPs 1-5 (i.e., research projects on variable annuities and ALM) and RPs 7-8. On the other hand, depending on the underlying model, use of option data can increase the computation time; therefore, this project may border on high-performance platforms and is related to RP 11-13.

Results

Deliverables

DELIVERABLE 3.3 on project 6 (C. Pisani, AU): "Report on validation and implementation of developed modelling approaches" [download]

Dissertation

Publications

  • Baldi, P. & Pisani, C. (2013) "Simple Simulation Schemes for CIR and Wishart Processes", International Journal of Theoretical and Applied Finance, Vol. 16, No, 8. [download]

Presentations

  • Pisani, C. “Second order discretization schemes for Wishart processes and applications to option pricing” presentation during the annual meeting of “Premia”, Paris, 13th March 2015.
  • Pisani, C. "The Arbitrage-free Multivariate Mixture Dynamics Model", PhD day MathFinance students, Imperial College, London, December 8th 2014.
  • Pisani, C. "OU Processes, Density Approximations and Volatility Derivatives", Aarhus FRG Conference, Sandbjerg, June 19th 2014.
  • Pisani, C. "The Impact of Jump Distributions on the Implied Volatility of Variance", 8th World Congress of the Bachelier Finance Society, Brussels, June 2th-6th 2014.
  • Pisani, C. "The Impact of Jump Distributions on the Implied Volatility of Variance", Rising Stars of Quantitative Finance-Global Derivatives, Amsterdam, May 14th 2014.
  • Pisani, C. "A Simple Simulation Procedure for CIR and Wishart Processes", QMF Conference, Sydney, Australia, 17th-20th December, 2013.
  • Pisani, C. "Jump Modeling for Realized Variance Options", Aarhus FRG Conference, Sandbjerg, June 20th 2013.
  • Pisani, C. “Simple simulation schemes for CIR and Wishart processes”, poster presentation, Frontiers in Financial Mathematics 2013, Dublin, June 2013.

Final conference

Camilla Pisani (Aarhus University): Methods for modelling and calibrating to volatility surfaces for interest rates, equities, credit, and foreign exchange