Research & Insights

Let us share some of the research and insights from our partners and academic network.

SEB – A new solution to ensure compliance and manage risk

Algorithmica Research AB
“With the installation of Algorithmica Research’s IRRBB Solution we will leverage our current market risk installation giving substantial advantages when calculating IRRBB both in speed, efficiency and flexibility.” – Edwin Luppert, Head of Market Risk at SEB SEB is a…

Market rates tell the tale of the size of future rate hikes
From the analysts and economists at the bank, you get the news story. How much will the central bank change the rate at the next meeting, and perhaps also the meeting after that? As rates traders need to make markets every day, they also must anticipate future central bank moves….

Exotic Derivatives and Deep Learning

By Axel Broström and Richard Kristiansson
Thesis (PDF)
This Master thesis investigates the use of Artificial Neural Networks (ANNs)for calculating present values, Value-at-Risk and Expected Shortfall of options, both European call options and more complex rainbow options. The performance of the ANN is evaluated by comparing it to a second-order Taylor polynomial using pre-calculated sensitivities to certain risk-factors….

Dual bootstrapping and multiple-tenor swap curve construction

Algorithmica Research
Presentation (PDF) Tech Interface (PDF)
A short presentation on the basic building blocks of creating forward curves after the credit crisis. We look at curve blending, extrapolation and interpolation issues, as well as modeling tools. An example of multi-tenor EUR-swap curve is presented. This is a non-technical presentation. For more information please contact Magnus Nyström.

Calibration of the volatility surface

By Erik Nilsson
Master Thesis (PDF)
This thesis consists of two parts, one concerning implied volatility and one concerning local volatility. The SABR model and SVI model are investigated to model implied volatility. The performance of the two models were tested on the Eurcap market in March 2008. Two ways of extracting local volatility are reviewed…

Monte Carlo simulation techniques

By Emma Nilsson
Master Thesis (PDF)
Master Thesis researching the possibilty to create a general monte carlo simulation framework using low discrepancy sequences. Standard Monte Carlo requires a large number of trials and is therefore slow. To speed up the process there exist different variance reduction techniques and also Quasi Monte Carlo simulation, where deterministic numbers…

Calibration of Bermudan Swaptions using limited data

Mattias Jansson
Thesis (PDF)
The focus of this thesis is on the risk neutral valuation of Bermudan swaptions and its application to pricing situations where observed market data used for calibration is limited. By exploring the properties of the solution to the optimal stopping problem that specifies the price process of these instruments, a…

A Monte Carlo solver for financial problems

Stefan Thorén
Thesis (PDF)
This thesis proposes a way to design software for Monte Carlo simulation that facilitates the simulation of many different kinds of stochastic processes. Monte Carlo simulation is a powerful tool that has applications in many financial contexts. One important application is the pricing of complex financial derivatives. A software for…

A biased comparison between Quantlab and Matlab

By Algorithmica Research
Presentation (PDF)
Reflections on choosing development tools for applied financial engineering. We present a brut force code comparison on creating and plotting the extended Nelson-Siegel yield curve using both Quantlab and Matlab. This example is simplistic – but choosing platform for financial engineering is not. On which level do you want your…

On Modelling and Pricing Weather Derivatives

By Peter Alaton, Boualem Djehiche & David Stillberger
Paper (PDF)
The main objective of this work is to find a pricing model for weather derivatives with payouts depending on temperature. We use historical data to first suggest a stochastic process that describes the evolution of the temperature. Since temperature is a non-tradable quantity, we obtain unique prices of contracts in…