Regression analysis is a common tool in performance management and measurement in industry. Many firms wish to optimise their performance using Stochastic Programming but to the best of our knowledge there exists no scenario generation method for regression models. In this paper we propose a new...

Regression analysis is a common tool in performance management and measurement in industry. Many firms wish to optimise their performance using Stochastic Programming but to the best of our knowledge there exists no scenario generation method for regression models. In this paper we propose a new...

This report was originally written as an industry white paper on Hedge Funds. This paper gives an overview to Hedge Funds, with a focus on risk management issues. We define and explain the general characteristics of Hedge Funds, their main investment strategies and the risk models employed. We...

Volatility modelling has become a significant area of research within Financial Mathematics. Wiener process driven stochastic volatility models have become popular due their consistency with theoretical arguments and empirical observations. However such models lack the ability to take into...

Regime switching volatility models provide a tractable method of modelling stochastic volatility. Currently the most popular method of regime switching calibration is the Hamilton filter. We propose using the Baum-Welch algorithm, an established technique from Engineering, to calibrate regime...

The severity and occurrence of rare events in financial markets has had a fundamental impact on the pricing and risk management of financial derivatives, such as volatility smile curves. However rare event modelling poses a problem in efficient and accurate simulation due to fundamental issues...

The inefficient pricing of the CDS (credit default swap) market has been considered as one of the main causes of the Global Financial Crisis. As price discovery is theoretically related to liquidity, this has been considered a source of mispricing in this over-the-counter market. However the CDS...

This paper formed part of a preliminary research report for a risk consultancy and academic research. Stochastic Programming models provide a powerful paradigm for decision making under uncertainty. In these models the uncertainties are represented by a discrete scenario tree and the quality of...

This paper was presented and written for two seminars: a national UK University Risk Conference and a Risk Management industry workshop. The target audience is therefore a cross section of Academics and industry professionals. The current ongoing global credit crunch has highlighted the...

The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with constant volatility models up to stochastic volatility....