Tuesday 03 November 2009

08.30 Registration and refreshments

08.50 Welcome address

09.00 KEYNOTE ADDRESS: Solved and unsolved problems in financial engineering
- Primary financial assets including government bonds, corporate bonds, mortgage bonds, equities, currencies, and commodities and their properties
- Choices of stochastic processes for modelling primary assets and their consequences
- Financial derivatives and their risk-neutral and real-world pricing
- Corporate structure, structural models, links among different primary financial assets
- Single-name and multi-name credit risk; credit correlation; credit value adjustment
- Market microstructure
- Market impact and algorithmic trading
- Technical trading and time-series analysis
- Conclusions

Alexander Lipton, Managing Director, Global Head of Credit Analytics, Global Derivatives Analytics, MERRILL LYNCH

09.40 Roundtable discussion: Listed vs OTC derivatives markets: pros and cons
- OTC derivatives before, during and after the credit crunch. Which asset classes fared best and worst.
- The weakest links during the crisis -- derivatives prime brokerage, clearing, margining, counterparty risk, information asymmetry and the prisoner's dilemma
- Listed markets as a safe harbor. Is there sufficient liquidity?
- Central clearing of OTC derivatives -- will it be the necessary and sufficient solution?
- Exchange trading of standardized OTC products -- what are the perspectives?
- The future of the OTC and listed markets from sell-side and buy-side perspective

Arthur Berd, Head of OTC and Macro Vol Strategies, CAPITAL FUND MANAGEMENT SA
Kanwardeep Ahluwahlia, Chief Risk Officer, SWISS RE
Dr Jeremy Bezant, Independent Consultant, RFQ-HUB
Other speakers to be confirmed

10.20 KEYNOTE ADDRESS: Portfolio theory for investment in variance swaps
- Modeling univariate variance swap cash flows
- Constructing the joint distribution of variance swap cash flows across assets
- The index of acceptability as an optimisation criterion
- Full optimisation vs SPSA (Simultaneous Perturbation Stochastic Approximation)
- Results of applications on the top 50 S&P 500 stocks

Dilip Madan, Professor of Mathematical Finance, Department of Finance, Robert H. Smith School of Business, UNIVERSITY OF MARYLAND

11.00 Morning break and an opportunity to network

STREAM ONE: DERIVATIVES PRICING

11.30 Chairman’s opening remarks

John Crosby, Visiting Professor of Quantitative Finance, GLASGOW UNIVERSITY

11.40 The LMM Sabr model: calibration, hedging and pricing

Bullet points to be confirmed

Riccardo Rebonato, Global Head of Market Risk, RBS

12.20 Hazardous information on credit risk
- Issues in credit risk modelling
- Building market filtration for credit events
- Dynamics of defaultable bonds and innovations representation
- New information-based model for hazard and forward hazard rates

Dorje Brody, Reader in Mathematics, Department of Mathematics, IMPERIAL COLLEGE LONDON

13.00 Lunch and an opportunity to network

14.10 Advances in equity modelling: meet the Sato-Levy family
(joint work with Dilip Madan)
- Combining the best of Levy with the best of Sato processes
- Introducing the new Savy model
- Modelling front and back end options simultaneously
- Application to exotic option pricing

Wim Schoutens, Research Professor, CATHOLIC UNIVERSITY OF LEUVEN

14.50 Multi-dimensional stochastic volatility: calibration to basket and outperformance options
- Understanding the deterministic volatility case
- Stochastic volatility case
- Parameterisation of correlation matrix
- Application: impact on outperformance options and other products

Franck Viollet, Director, Equity Derivatives Quantitative Analytics BARCLAYS CAPITAL

15.30 Afternoon break and an opportunity to network

16.00 Levy lights and levy flights
- Rationale for approximating Levy processes by a hyperexponential jump-diffusion process.
- A new methodology
- Examples and comparisons of vanilla option prices
- Examples and comparisons of barrier option prices

John Crosby, Visiting Professor of Quantitative Finance, GLASGOW UNIVERSITY

16.40 Modelling energy commodity American options in the framework of the non-Markovian approach
- Modelling American options on energy spots, forwards and swaps
- Taking into account seasonalities, trends and spikes
- Extracting risk-neutral probability distributions
- The semi-linear evolution equation and the multi-layered tree methods
- Examples of the American options on crude oil and natural gas

Valery A. Kholodnyi, Principle Quantitative Analyst, Risk Management, VERBUND AUSTRIAN POWER TRADING AG

STREAM TWO: QUANTITATIVE METHODS FOR RISK MANAGERS

11.30 Chairman’s opening remarks

Arthur Berd, Head of OTC and Macro Vol Strategies, CAPITAL FUND MANAGEMENT SA

11.40 Managing diversification: performance of mean diversification optimisation
- Review of pros and cons of common diversification measures
- Definition of conditional PCA-based diversification distribution for fully general long-short, correlated markets
- Diversification index based on conditional PCA and entropy
- Mean-diversification optimization: theory
- Mean-diversification optimization: practice, with transaction and market impact costs

Attilio Meucci, Head of Research, ALPHA PORTFOLIO ANALYTICS AND RISK

12.20 Quantitatively building a portfolio of hedge fund investments
- Salient characteristics of candidate hedge funds time series – challenges and issues
- Suitable optimization models
- Forecasting expected returns and other input parameters and constraints
- Implementation and results

BernardMinsky, Head of Portfolio Analysis and Risk Management, INTERNATIONAL ASSETMANAGEMENT
Rishi Thapar, Senior Quantitative Analyst, INTERNATIONAL ASSETMANAGEMENT

13.00 Lunch and an opportunity to network

14.10 Handling extreme events better by blending together principal components analysis with independent components analysis
- Fat-tails: what they are, why they are problematic and what seems to cause them
- Impact of fat-tails on portfolio construction
- Analysing what drives markets:
- Principal Components Analysis
- Independent Components Analysis
- Regime shifts
- Blending together PCA and ICA for refined risk model and portfolio construction purposes

Malcolm Kemp, Risk and Quantitative Finance Specialist, formerly THREADNEEDLE

14.50 Modelling risk and return in the real world – relevance of VaR, portfolio construction for illiquid markets, and risk monitoring in uncertain times

Daniel Wallick, Principal, VANGUARD

15.30 Afternoon break and an opportunity to network

16.00 Model-free volatility, skewness and kurtosis indices
-Model-free moment generating function for risk-neutral measure; alternative derivations of indices for:
- volatility
- skewness
- kurtosis
-Comparison of moment indices:
- for log returns
- for prices
- derived from implied density fitting
-Empirical results for FTSE 100 index
- Option price data, interpolation and extrapolation
- Term structures for VFTSE, SFTSE and KFTSE
- Statistical properties, and comparison of alternative methodologies for model-free moment indices

Carol Alexander, Professor of Financial Risk Management and Director of Research, ICMA CENTRE

16.40 CALL FOR PAPERS WINNER: If worst comes to worst: Systematic stress tests with discrete and other non-normal distributions

Thomas Breuer, Director, PPE Research Centre, FH VORARLBERG, DORNBIRN, AUSTRIA

17.20 Chairman’s closing remarks

17.30 Cocktail reception