I started off as a computer scientist and a programmer in an earlier life. After spending 8 years struggling to make money with technology I gave up and defected to the business side and have been here since then.
My specialty is risk platforms for the financial services sector and while concepts that I use here are applications from financial services sector they can be used with some…
Portfolio VaR is a very important measure for assessing the market risk inherent in the entire portfolio of an entity. It is a measure whose calculation is often linked to heart burn because the risk manager envisions the very labor-intensive construction of the variance covariance matrix. In our courses on Value at Risk, Calculating Value at Risk & Portfolio VaR, we propose a remedy that should provide…
Value at Risk is a measure of the worst case loss that may occur over a specified holding period for a given probability. It is a measure used widely to assess the market risk inherent in a given investment or portfolio of investments.
Portfolio VaR – EXCEL Example is a detailed calculation sheet that demonstrates the calculation of VaR for a portfolio of six instruments comprising of 3 foreign…
Check out free sample snippets from our courses on Calculating Value at Risk, Option Pricing, Monte Carlo Simulation and understanding N(d1)
It is embarrassing to confess but it is a question that stumped me the first time a student posed it.
What is N(d1) and how is it different from N(d2)?
The difference is as subtle and fundamental to derivative pricing as is fission and fusion in nuclear physics. In…
In the summer of 1987, Lotus Symphony was the category killer in the integrated spreadsheet market. It was also my first introduction to the animals called spreadsheets and financial models. While other 16 year olds were doing things that 16 year olds are supposed to do in the summer, yours truly was digging through Symphony help to figure how to link a financial model together. A side lane…
The Free Trial period of the online Quant Crash Course expired at 1 pm Eastern time, 28th February 2011.
However you can still see select video snippets from all four parts of the Quant Training Crash course at the Finance Training Videos post.
The Quant Crash Course is based on the first half day of Jawwad Farid’s risk training courses and covers volatility, value at risk, capital and…
The Quant Crash Course is a 200 minute series of 4 videos that cover the basics of quant and computational finance. The course material and series has evolved over the last 8 years as part of the training practice run by Jawwad Farid in the areas of derivative pricing and risk management. As part of this practice Jawwad has delivered over a hundred courses…
In this post we will consider how the Black-Derman-Toy (BDT) short rate binomial tree will be used to price options on bonds.
Pricing OptionsThe BDT model may also be used to price put or call options on bonds. For the purpose of calculating these prices it is important to generate the entire short interest rate tree until the expiration of the option. The prices of the underlying coupon bearing instrument…
In this post we will consider how the Black-Derman-Toy (BDT) short rate binomial tree will be used to price bonds.
Pricing BondsFor example, we illustrate the use of the short rates to price a hypothetical 3-year fixed income bond at issue as follows:
Using the observed YTM and the excel price formula the price of the security works out to 99.94. Using the BDT model…
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