Wednesday 11 July 2007

Emanuel Derman, Head of Risk, PRISMA CAPITAL PARTNERS; Professor, COLUMBIA UNIVERSITY

Emanuel Derman (www.ederman.com) is a professor and director
of the financial engineering program at Columbia University, as well
as Head of Risk at Prisma Capital Partners. His book, ‘My Life as a
Quant: Reflections on Physics and Finance’ was one of Business
Week’s top ten books for 2004. He obtained a PhD in theoretical physics in 1973, and was a managing director in charge of the Quantitative Strategies group at Goldman Sachs before coming to Columbia in 2002.

08:30	Registration and coffee
09:00	Editor’s opening remarks
09:10	Keynote address: Modelling and its discontents The point of a model: in science, in trading Risk and uncertainty Just a few of the crimes you can commit Using models appropriately Emanuel Derman, Head of Risk, PRISMA CAPITAL PARTNERS; Professor, COLUMBIA UNIVERSITY
	STREAM ONE: Advanced modelling and pricing of derivatives	STREAM TWO: Latest innovation in risk management and measurement
09:50	Chairman's opening remarks Claudio Albanese, INDEPENDENT CONSULTANT	Chairman’s opening remarks
10:00	Developments in volatility derivatives pricing Model independent result Buehler’s consistent variance curve models Calibration and pricing Jim Gatheral, Managing Director, MERRILL LYNCH	Implementation of Basel II and its validation The good, the bad, and the ugly: facets of implementing the Accord Banking book charges and the three inputs Validating EADs: issues with long and short dated trades Validating PDs: problems with thin data Validating LGDs: collateral modelling challenges Putting it together: systems challenges and opportunities Rupert Cox, Senior Managing Director, Head for Firm Risk Analytics, Global Risk, BEAR STEARNS
10:40	Morning break and an opportunity to network
11:00	Inflation link derivatives The CPI index and definition of inflation Seasonality in inflation Overview of inflation-linked structured products Inflation-linked zero-coupon and year-on-years swaps Inflation options Pricing using Jarrow-Yildirim model and market model Nikolay Staykov Stoyanov, Associate Director, US Inflation Trading, BARCLAYS CAPITAL	Integrated Risk Management and Economic Capital How to combine aggregated risks in a financial institution Top-down vs. bottom-up; simple and more sophisticated approaches Inter-risk diversification, integration of different risk types Risk allocation and contribution/attribution Capital requirements Til Schuermann, Assistant Vice President, Research, FEDERAL RESERVE BANK OF NEW YORK
11:40	Commodities outlook: Panics, spikes and rallies The crucial role of volumes in explaining volatility in commodity markets Inventory and shape of the forward curve The particular case of crude oil in the recent period Correlations between oil and gas spot and forward prices Seasonal and stochastic effects in natural gas markets Investing in commodity indexes: choosing the basket, the weights and the optimal roll yield Professor Hélyette Geman, Director, Commodities Finance Centre, BIRKBECK COLLEGE, UNIVERSITY OF LONDON	Risk budgeting and portfolio construction Portfolio risk measurement Expected shortfall and other appropriate measures for actively measured portfolios Asset allocation dynamics Risk constraints and implications for asset allocation Portfolio construction strategies Maurizio Ferconi, Managing Director, Head of Financial Engineering, PUTNAM INVESTMENTS
12:20	Beyond HJM and the Libor Market Model: Interest rate options in quantum finance Review of HJM and BGM swaption price Quantum field theory of forward interest rates Feynman perturbation expansion for European swaptions Empirical test of swaption price Algorithm for pricing American swaptions Belal E. Baaquie, Professor of Physics, NATIONAL UNIVERSITY OF SINGAPORE	Measuring correlation risk Review of linear correlation Different parameterizations of correlation matrices Generating distributions of correlation entries and correlation matrices Correlation VAR Examples Roza Galeeva, Vice President, Finance Division, MORGAN STANLEY
13:00	Luncheon and an opportunity to network
14:00	Chief Risk Officer roundtable: Living in a risky climate: Are we taking it seriously? Growing demand for free market mechanism Current deals assessment What is the impact on insurance companies and hedge funds What the covariance matrix tells us about the risk expectations of the market Moderator: Timothy Wilson, CRO, CAXTON ASSOCIATES Kenneth Winston, CRO, MORGAN STANLEY INVESTMENT MANAGEMENT Elliot Noma, Senior Vice President, CRO, Portfolio Manager, ASSET ALLIANCE Peruvemba Satish, CRO, DKR CAPITAL PARTNER LP
14:40	Empirical models of single- and multi-name debt-equity relationship Linking single-name equity and credit derivatives Time series models of debt-equity relationship Cross-sectional variation of debt-equity relationship The underlying dynamics of equity and credit correlations and tail risks Arthur M. Berd, Quantitative Strategist, BLUEMOUNTAIN CAPITAL MANAGEMENT Artem Voronov, Quantitative Strategist, HYDEGATE DEVELOPMENT LTD	Macroeconomic scenario analysis and stress testing of a bank’s portfolio Designing adequate macroeconomic scenarios for stress testing Translating macroeconomic scenarios into bank-specific risk factors Estimating the impact of a stressed scenario on a bank’s portfolio New approaches to stress testing traded credit portfolios Antonio Garcia Pascual, Financial Economist, Monetary and Capital Markets Department, INTERNATIONAL MONETARY FUND
15:20	Afternoon break and an opportunity to network
15:40	Credit default swaps and equity options Calibrating to both the vol surface and the CDS spread curve Robust replication of default and volatility derivatives Arbitraging disintegrated markets Dealing with jumps, stochastic default intensity, and SV Peter Carr, Head of Quantitative Financial Research, BLOOMBERG LP	Empirical Analysis of Realized Variance and Covariance Estimators Market-microstructure induced bias in traditional realized variance and covariance estimates. Graphical tools to compare the variability of bias correcting estimators. Provide a visual “gut check” for particular realized variance or covariance estimates. Beta realized variance and covariance open source library (S-Plus and R) Scott Payseur, Senior Financial Engineer, PhD Candidate University of Washington, Economics, INSIGHTFUL Corporation
16:20	Financial engineering of leveraged buyouts in incomplete markets Continuous-time equity models and a conditional quant rejection of the Miller-Modigliani theorem Simultaneous valuation of the acquiring and of the target company The non-hedgeable risk premium: market risk, interest rate risk, credit risk Risk management in incomplete markets: partial, yet the most conservative hedging Srdjan Stojanovic, Professor, Department of Mathematical Sciences, UNIVERSITY OF CINCINNATI	Measuring up counterparty credit risk Credit value adjustment (CVA) as the price of counterparty risk Contract level vs. counterparty level CVA and risk neutral expected exposure Simulating risk neutral exposure Accounting for wrong-way risk Michael Pykhtin, Vice President, BANK OF AMERICA
17:00	Entropy maximization applications to pricing of index and bespoke tranches Pricing non-standard tranches with ME Pricing bespokes with ME and heuristic methods Cheap-rich tranche analysis Relationship between ME and other copulas Luigi Vacca, Head of GSP QA, RADIAN ASSET ASSURANCE	Validation of credit derivatives models Qualitative tests for framework Division of responsibilities Dynamic of losses Single-name products CDO, Nth-to-default, and other basket products Volatility and correlation dynamics Martin Goldberg, Director, Head of Model Validation, CITIGROUP
17:40	Chairman’s closing remarks
17:50	Cocktail reception
19:00	End of day one

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