Entrance hall of the ICMS Workshop

MIGSAA Industrial Sandpit 2017

Nov 24, 2017

ICMS, Edinburgh

MIGSAA’s fourth Industrial Sandpit takes place on Friday 24th November from 12.30 pm with lunch and registration in the Chapterhouse, ICMS, 15 South College Street.  Presentations take place in the Newhaven Lecture Theatre.  The meeting will finish around 5.00pm.

 

Arrangements

The meeting will start with a sandwich lunch at 12.30pm.  Talks will start at 1.30pm.

Please register using the form.

Programme

12.30   Sandwich Lunch and Registration (Chapterhouse, Level 1)

13.30   Welcome and Introduction (Newhaven Lecture Theatre)

  •  MIGSAA plans for taster/extended projects
  •  Overview of Annual Modelling Camp Activities

13.45   Talk 1:  Douglas McLean Moody's Analytics:

           On the use of the Fokker-Planck Equation in the Libor Market Model Nominal Interest Rate Model

14.15   Talk 2:  Ignazio Viola,  Flowave

           https://www.flowavett.co.uk/

14.45   Coffee

15.15   Talk 3:  Fabio Dioguardi, BGS

           Ash Dispersal in the atmosphere, plume heights from volcanoes and the impact on the aviation industry

15.45:  Talk 4:  to be confirmed

16.15   Discussion

17.00   Meeting Close

 

 

Title: "On the use of the Fokker-Planck Equation in the Libor Market Model Nominal Interest Rate Model".

Dr Douglas McLean, Portfolio and Balance Sheet Management - EMEA, Moody's Analytics

Abstract:

"The Libor Market Model quickly established itself as the standard forward nominal interest rate model used by banks and other financial institutions. Cast as a system of coupled stochastic differential equations, its principal use is in the pricing of derivative securities written on nominal interest rates such as caplets and swaptions. An extension of the model to a displaced Libor rate allows modelling of negative interest rates and a further extension to a stochastic volatility permitted pricing of securities which were not struck "at-the-money" such as may be the case in derivative backed hedging portfolios of insurance liabilities. One stylised fact that differentiates an insurer's portfolio from an investment banking portfolio is in the relatively long duration of insurance liabilities: typical terms can be in excess of 60 years. This introduces a peculiar artefact: the problem of computationally large rates. For an insurer, the presence of such large rates can make it impossible to find the fair value of their insurance liabilities and guarantees. Through examples and some limited analytics, I will illustrate how we can study the evolution of these large rate distributions through the Fokker-Planck equation and I will illustrate the depth of the problem and why it is worthy of academic attention."

 

Participants

Name Institution
Aduamoah, Mildred MIGSAA
Baker, Katie MIGSAA
Chapouto, Andreia MIGSAA
Cruise, James Heriot Watt University
Dent, Chris University of Edinburgh
Fitch, Davey UoE
Kerimkulov, Bekzhan MIGSAA
Knops, Robin HW
Lacey, Andrew Heriot-Watt University
Lazaridou, Christina MIGSAA
Ottobre, Michela Heriot Watt
Svetlosak, Andrej University of Edinburgh
Tang, Michael MIGSAA
Vlaar, Tiffany MIGSAA