The recent crisis and the following flight to simplicity put most derivative businesses around the world under considerable pressure. We argue that the traditional modeling techniques must be extended to include product design. We propose a quantitative framework for creating products which meet...

Financial markets provide a natural quantitative lab for understanding some of the most advanced human behaviours. Among them is the invention and use of mathematical tools known as financial instruments. Besides money, the two most fundamental financial instruments are bonds and equities. More...

Financial derivatives have often been criticized as casino-style betting instruments. It turns out that many naive ways of making them are indeed equivalent to gambling. Fortunately, this inadvertent effect can be understood and prevented. We present a theory of product design which achieves that

Quality-designed consumer products are easy to recognize. Wouldn't it be great if the quality of financial products became just as apparent?This paper is addressed to financial practitioners. It provides an informal introduction to Quantitative Structuring -- a technology of manufacturing...

"What are the origins of risks?'' and "How material are they?'' -- these are the two most fundamental questions of any risk analysis. Quantitative Structuring -- a technology for building financial products -- provides economically meaningful answers for both of these questions. It does so by...

We review the current practice in the design of investment products. It turns out that the quality of products can be substantially improved with a relatively small quantitative effort. Recognizing financial products as the ultimate output of our industry this approach puts demands on support...

We often think of hedging and investments as having different, even competing goals. In reality optimal hedging and optimal investments are intimately connected. One person's optimal investment is another's optimal hedge. This follows from a geometric structure formed by probabilistic...

We present a theory of product design covering a large class of investors. Bayesian laws of information processing provide the logical foundation and lead to a simple structuring tool -- the payoff elasticity equation. Structuring of investment derivatives is summarized as a manufacturing process.

The recent crisis and the following flight to simplicity put most derivative businesses around the world under considerable pressure. We argue that the traditional modeling techniques must be extended to include product design. We propose a quantitative framework for creating products which meet...