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Home >> News & Events >> Press Release >> Pricing Partners makes a significant progress on stochastic volatility - May 09
Pricing Partners makes a significant progress on stochastic volatility - May 09

 

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Pricing Partners makes a significant progress on stochastic volatility

Paris - London - Pricing Partners www.pricingpartners.com, the independent valuation expert and a world leader in mathematical models for derivatives and structured products pricing, announced a significant progress in the perturbation methods for stochastic volatility models. These discoveries were presented for the first time at the 3rd edition of the days of numerical methods in finance, organized by the Fondation du Risque and The Ecole des Ponts Paritech. This work focuses on the quick calculation of analytical formulas for stochastic volatility models with time-dependent parameters. These analytical formulas are very accurate and as easy to implement as the Black Scholes with a gain in computing time of the order of 100 times or more compared to the traditional Fourier methods for stochastic volatility models. This work is particularly relevant in this crisis environment since markets volatility reached record levels and must be taken into account by stochastic volatility models.

This work comes from an active and fruitful collaboration with Professor Emmanuel Gobet from the Jean Kuntzmann research center (of the University of Grenoble and CNRS) in Grenoble and Pricing Partners (with the participation of Mr Mohammed Miri and Mr Eric Benhamou). They use a technique for explicit calculation of analytical formulas with perturbation methods and Malliavin calculus. They are already the subject of 2 publications to come in prestigious journals, "Finance and Stochastics" and "International Journal of Theoretical and Applied Finance”. They allow the calculation of approximated formulas in more realistic models such as local volatility models with jumps and stochastic volatility models.

The last results were presented by Mr Mohammed Miri at the third edition of the days of Numerical Methods in Finance. This conference is an important event for the scientific community working on numerical methods in finance. This conference took place at the Ecole des Ponts et Chaussées, 15 to 17 April 2009. Well known researcher either from Academia or from the Industry like Professor Rama Cont of the CNRS and the Columbia University, Dr. Damien Brigo of Fitch Solutions, Professor Yacine Aït Sahalia of Princeton University and Mr Pierre Henry-Labordère of Société Générale presented their latest works. This conference led to the presentation of many high quality works in the field of quantitative research. For Pricing for Partners, this was an opportunity to present his latest work on perturbation methods.

Eric Benhamou, CEO of Pricing Partners comments: "We are proud to present our latest work at a conference as prestigious as the 3rd edition of the days of numerical methods in finance. Our work for calculating approximated formulas for stochastic volatility models seems very topical. Taking into account market risks in a more realistic has become a major priority, especially in the context of our independent valuation services. Our collaboration with Professor Emmanuel Gobet enabled us to make significant progress in our knowledge. Pricing Partners is a company deeply involved in research and development and invests heavily to find new algorithms and models to provide more accurate valuation models and tools. And in these disrupted periods, we must redouble our efforts to improve our understanding of risk."
 

Bernard Lapeyre, professor at the Ecole Des Ponts Paritech declares: "We welcome Pricing Partners at the 3rd edition of the days of numerical methods in finance. The conference is intended to be a tribune for most promising research works, and we are pleased to listen to the latest advances of Pricing Partners.”

Emmanuel Gobet, professor at the ENSIMAG and member of the Jean Kuntzman Laboratory added "the works done with Pricing Partners are of great interest because they not only give a precise answer to the problems of approximation but also enable to control the error of approximations.”

The works presented at the conference are available on the conference website http://cermics.enpc.fr/cnf.htm. The works of Pricing Partners are available published at www.ssrn.com 

 

About the Conference "Third Conference on Numerical Methods in Finance" 

The Conference "Third Conference on Numerical Methods in Finance has been organized by the École des Ponts (ParisTech), in partnership with the Financial Chair of the Risk Foundation. This conference is an important event for the scientific community working on numerical methods in finance. This conference took place at the Ecole des Ponts et Chaussées, 15 to 17 April 2009. Well known researcher either from Academia or from the Industry like Professor Rama Cont of the CNRS and the Columbia University, Dr. Damien Brigo of Fitch Solutions, Professor Yacine Aït Sahalia of Princeton University and Mr Pierre Henry-Labordère of Société Générale presented their latest works.

For more information, visit http://cermics.enpc.fr/cnf.htm

 

About Laboratoire Jean Kuntzmann at Grenoble

The LJK laboratory (UMR CNRS 5224) is an Applied Mathematics and Computer Science laboratory created in January 2007 in Grenoble, France. A joint research unit of the UJF, the INPG, the UPMF, the CNRS and INRIA, it combines the forces of applied mathematicians and statisticians from the former laboratories LMC and LabSAD with graphics and computer vision experts from the former laboratory GRAVIR. Its expertise centres on the computational and statistical sciences and their uses in analysing natural phenomena, with applications ranging from environmental modelling through life sciences, nanosciences, visualisation and signal processing to mathematical finance. The name of the laboratory refers to Jean Kuntzmann (1912-1992) who was the inventor of the field of data processing and applied mathematics in Grenoble. 

Professor Emmanuel Gobet is the scientific leader of the research group Financial Mathematics of LJK and he is the head of the Financial Engineering Master program in Grenoble INP - Ensimag. The research projects of this team are related to the modeling and calculation for issues in risk management, in the areas of finance, insurance and energy. Emmanuel Gobet says: “We made real time computing a priority in our research program, coherently with the LJK axis High Performance Computing. Industrial collaborations with Pricing Partners illustrate this perfectly well“. The MATHFI team also has academic collaborations with LIG (team MOAIS), about Monte Carlo methods used with grid computing. Moreover, a team LJK-LIG gained the 5th international challenge GRID@WORK “2008 Super Quant Monte Carlo “ held in Nice in October 2008, consisting in accurately computing prices and Greeks of 1000 exotic options, written on a very large portfolio. For this, almost 4000 cores were available during one hour.

For further information,  see the site of the MathFi team: http://www-lmc.imag.fr/MATHFI/

 

About Pricing Partners 

Set up by former professionals of the trading industry, Pricing Partners offers accurate solutions for derivatives products valuation, pricing tools and risk analytics. Thanks to Price-it online, a SaaS platform, Pricing Partners provides independent valuation from the vanilla to the most exotic financial products on most assets (Interest Rates, Fixed Income, Equity, Inflation, Credit, Foreign Exchange, Commodities, Life Insurance and Hybrid products). Pricing Partners develops and commercializes Price-it Excel, an analytic and independent pricing library using a generic payoff language description which allows the pricing of virtually any financial derivatives. Price-it also supports VaR, CVaR and the most common risk management tools. Pricing Partners is the only company completely mastering the chain of valuation, developing both its own pricing library and a valuation platform giving its clients very accurate and reliable valuation as a result of its intrinsic knowledge of the pricing tools. Pricing Partners solutions can be used by investment banks, buy side firms, hedge funds, financial departments, trading rooms and audit firms.

Pricing Partners has also signed numerous partnerships to distribute its technology with leading institutions like NYSE Euronext (for its independent valuation service via Primesource), Misys (for its pricing library integrated into Summit), CMA or Lexifi. It is also a Microsoft IDEES partner, an IBM, Sun, Datasynapse partner. It is also a member of the grid research consortium GCPMF regrouping BNP Paribas, Calyon, Ecole Centrale, EDF, Ecole des Ponts Paritech, the Inria, Natixis, Misys, Pars VI University and Supelec and a global coordinator of the Credinext consortium, a collaborative project supported by the cluster Finance Innovation and done in collaboration with PrimeSource, Lunalogic, the Ecole Polytechnique, the Ecole des Ponts Paritech, the University of Marne La Vallée and the INRIA.

 

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