Where the Betas are Zero and the Excess Returns are All Above Average Recently I became interested in ‘alternative investment management’, the nowfashionable euphemism (NFE)…

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It’s All Greeks to Me With my scientific PhD, I find option theory easy as Ï€. I have studied heat conduction and quantum mechanics…

Comments closedEmanuel Derman says it is essential for the aspiring super-quant to overlay theoretical knowledge with pragmatic common sense. For the past few months, I’ve been…

Comments closedTrading Volatility as an Asset FULL Volatility is a useful trading hedge against all kinds of disasters. How can you trade it? Calls and puts…

Comments closedThe Problem the Volatility Smile Amsterdam Though the smile first appeared in options markets in 1987, I had it brought to my attention in Tokyo…

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Comments closedThese are paranoid times in America, but justifiably so, and when I became Chairman of the Award Committee that eventually nominated Jon Ingersoll to be…

Comments closedBy Nina Mehta Emanuel Derman was one of the early rocket scientists to make the shift to finance. He received his Ph.D. in theoretical particle…

Comments closedThere is an unfortunate strain of pedantry running through the teaching of quantitative finance, one involving an excess of abstraction, formality, rigour and axiomatisation that…

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Comments closedderman intrinsic time The perception of time, risk and return during periods of speculation The second hypothesis concerns the perception of time. I conjecture that…

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Comments closedSURVEY: INTERNATIONAL FINANCE Bubble trouble May 16th 2002 From The Economist print edition All this gives rise to various dangers. An ever-tighter squeeze on the…

Comments closedSURVEY: INTERNATIONAL FINANCE Bubble trouble May 16th 2002 From The Economist print edition Why do so many people cling so hard to the notion of…

Comments closedReal-World Quantitative Finance (A Poor Man’s Guide To What Physicists Do On Wall St.) Models in Physics

Comments closedPrinciples.Risk INTRODUCTION Trading desks in many product areas at investment banks often have substantial positions in long-term or exotic over-the-counter derivative securities that have been…

Comments closedWhen I started working on Wall Street, I simply assumed it made good sense to apply the techniques of physics and applied mathematics to financial…

Comments closedQuantitative financial modelling seems to employ both the language and techniques of physics, but how similar are the two disciplines? Emanuel Derman comments on the…

Comments closedNEW YORK, September 7, 2000 SunGard Trading and Risk Systems and the International Association of Financial Engineers (IAFE) today announced that Emanuel Derman has been…

Comments closedI’m very pleased and very honored to be able to introduce Dr Oldrich Vasicek here today on his induction into the Derivatives Hall of Fame.…

Comments closedMetaphors, Models & Theories When I was in grade school we used to build model airplanes out of kits. The frame was made out precut…

Comments closedInvestors in equity options experience two problems that compound each other. In contrast to fixed-income and currency markets, there are thousands of underlyers and tens…

Comments closedrisk-regimes_of_volatility Since the 1987 stock market crash, the S&P 500 index options market has displayed a persistent implied volatil- ity skew. How should the skew…

Comments closedVolatility swaps are forward contracts on future realized stock volatility. Variance swaps are similar contracts on vari- ance, the square of future volatility. Both of…

Comments closedIn this paper we present an arbitrage pricing framework for valuing and hedging contingent equity index claims in the presence of a sto- chastic term…

Comments closedThe insight behind the Black-Scholes formula for options valuation is the recognition that, if you know the future volatility of a stock, you can replicate…

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Comments closedScientific American: Feature Article: A Calculus of Risk: May 1998

Comments closedWhat is the purpose of modelling, in any field? Clearly, it is divination whether foretelling the future, or controlling it. So my task here is…

Comments closedWhat is the purpose of modelling, in any field? Clearly, it is divination whether foretelling the future, or controlling it. So my task here is…

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