HIPERFIT News February 2015

News from the Research Center on Functional High-Performance Computing for Financial IT

Starting February 2015, HIPERFIT is hosting bi-weekly seminars on a variety of topics related to the HIPERFIT Research Center activities. The seminars are usually held every second Tuesday. The first two seminars are scheduled as follows:

  February 6, 15:15, AUD 10, HCØ (NOTE Friday)
  Interbank Convexity Adjustments, Raquel Gaspar (Lisbon)
  Organised in collaboration with MATH

  February 17, 15:00, AUD 7, HCØ
  The SimCorp CV@R Project, a Status Update, Ken Friis Larsen & Rolf Poulsen (KU)

See below for details about the two February seminars. As always, more information about HIPERFIT activities is available from the HIPERFIT web site, including access to recent publications and presentations from the latest HIPERFIT Workshop.

Interbank Convexity Adjustments
Raquel Gaspar (Lisbon)

Time: Fri, February 6, 15:15
Place: AUD 10, HCØ

Convexity adjustments are used by practitioners to value non standard products using information on plain vanilla products. The real world interbank market is not populated risk less banks. This became particularly obvious after the financial crisis of 2007-2009. Nonetheless, most theoretical interest rate models, assume the risk in the interbank lending market is negligible, using interest rate sensitive products to build zero-coupon bonds curves. Here we take a different approach and consider the Libor rate L(t,T) is no longer a good approximation to the truly default-free interest rate. Thus, the value of contracts having as underlying the Libor rate, should be adjusted to correct for the true risk existent in the Libor rate. We call that adjustment an interbank convexity adjustment. In this paper we explicitly compute the interbank convexity adjustment of FRAs (Forward Rate Agreements), combining the classical affine term structure (ATS) framework with shot-noise process that are able to capture the counter-party risk of interbank contracts. (Joint work with José Cruz.)

The seminar is held in collaboration with Department of Mathematical Sciences.
Organizer: Jeffrey F. Collamore, MATH
The SimCorp CV@R Project, a Status Update
Ken Friis Larsen & Rolf Poulsen
Tue, February 17, 15:00
Place: AUD 7, HCØ

Based on the HIPERFIT Workshop presentation in December by Carl Balslev Clausen, SimCorp, on The MC^2 Challenge in Risk, we present our preliminary investigations of the problem and speculate on possible solutions to the challenge.
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