Pre-congress seminar 1

08.30	Registration and coffee
09.00	Managing smile risk Black-Scholes and the need for smile models Local volatility models and smile dynamics Stochastic volatility (SABR) models Volatility surfaces and Levy based models Patrick S. Hagan, Chief Investment Officer, JP MORGAN
11.00	Morning break
11.30	Calibration and pricing of exotics Managing exotic risks Key risks for interest rate exotics Calibration / evaluation methods Calibration strategy and selection of calibration instruments Valuation of exotics; dependence on the calibration set Risk generation Stable hedging of exotics Patrick S. Hagan, Chief Investment Officer, JP MORGAN
13.00	Lunch
14.00	Stochastic volatility and CMS CMS Convexity adjustments CMS derivatives and SABR model. Fixing indetermination using convexity adjustments Joint calibration to swaptions and CMS Stochastic volatility in hedging: The effect of volatility-rate correlation vs local volatility Massimo Morini, Head of Credit Models, Banca IMI
15.00	Afternoon
15.30	Stochastic volatility Libor models Libor Market Models with Heston stochastic volatility Practical testing. Calibration, regularity and CMS pricing An arbitrage-free SABR Libor Market Model with a simple closed-form formula Testing and pricing of out-of-sample derivatives. The risk of models with arbitrage Consistent modelling of cross-rate correlations and correlation with stochastic volatility Massimo Morini, Head of Credit Models, Banca IMI
17.00	End of seminar

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