Our study is described in a brochure available (Study Fitex negative impacts on the rate of an option pricing) by sending your request to info@fitex.com or identifiable by the following fields [..].
– Background
In financial mathematics, the yield curve impacts from short-term negative can be very important disability causing many pricing models, especially on derivatives. The result is that the studies that are conducted on this subject is crucial to give relevance to the valuation of the securities portfolio and related derivatives.
So Zeliade, publisher specialized in the design and development of financial libraries (libraries of pricing), decided to tackle a topic: In a context of low interest rates markets, expand pricing models for negative rates.
– Objectives
The Zeliade and Fitex Consulting companies chose to make a study of articles on models valuing options with negative rates. For this we use a collaborative platform (Zanadu) of implementation models presented in scientific papers
The main model was proposed by Numerix, a company specializing in research in quantitative finance. This is expansion of vector SABR model.
The aim is to implement the model for purposes of pricing and calibration from market data, then verify its robustness and computing performance.
For example, in terms of calibration, we swaptions (Maturity 5A) and Libor forwards and we find the model parameters as they breed the best prices on the market, including cases of strikes (price year) negative.
We design tests to reveal their advantages and disadvantages.
Conclusion: This type of study allows to offer pricing teams adaptations of models of disruptive market phenomena, in order firstly to best assess their future market transaction but also to develop closer their asset portfolio.