Scope: Security Models (per security and aggregated valuation and cashflow models), Market and Macro models for forward simulation, Capital plan models (actual, implied optimized, and forward models), Balance sheet models ( actual and forward simulated). Tools, testing, and prototyping will be covered as well.
People: Andrew Lo, Wilmott, Marco, Shreve, Duffie, Turnbull, Hull, …
Valuation model papers: Black Scholes 2014
Jarrow, R. and van Deventer, D. (1998), “The arbitrage‐free valuation and hedging of
demand deposits and credit card loans”, Journal of Banking & Finance, 22, 249‐272
Explanatories:
Cashflow model papers:
Martin Schneider, Borrowing Constraints in a Dynamic Model Of Bank Asset and Liability Management, 2001, here.
FDIC, Liquidity and Funds Management, here.
Helena von Feilitzen, Modeling Non–Maturing Liabilities. 2011, here.
Lo has a credit card model paper.
Expected Market data model papers:
LMM – BGM – Brace Gatarek Museila Model
- Brace, A., Gatarek, D. et Musiela, M. (1997): “The Market Model of Interest Rate Dynamics”, Mathematical Finance, 7(2), 127-154.
- Miltersen, K., Sandmann, K. et Sondermann, D., (1997): „Closed Form Solutions for Term Structure Derivates with Log-Normal Interest Rates“, Journal of Finance, 52(1), 409-430.
HJM
- Heath, D., Jarrow, R. and Morton, A. (1990). Bond Pricing and the Term Structure of Interest Rates: A Discrete Time Approximation. Journal of Financial and Quantitative Analysis, 25:419-440.
- Heath, D., Jarrow, R. and Morton, A. (1991). Contingent Claims Valuation with a Random Evolution of Interest Rates. Review of Futures Markets, 9:54-76.
- Heath, D., Jarrow, R. and Morton, A. (1992). Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation. Econometrica, 60(1):77-105. doi:10.2307/2951677
- Robert Jarrow (2002). Modelling Fixed Income Securities and Interest Rate Options (2nd ed.). Stanford Economics and Finance. ISBN 0-8047-4438-6
Expected Econometric data model papers:
Open Problems:
- Time and space tradeoff in NIMo simulation of cashflow models of retail deposits and loans.
- Deposit cashflow model
- Cards cashflow model
Bibliography v 0.0:
CIR.
Hayre, L. (2001). Guide to Mortgage-Backed and Asset-Backed Securities. John Wiley & Sons.
Ito, K., & McKean, H. P. (2008). Diffusion Processes and their Sample Paths. NY: Springer-Verlag.
Jarrow, R., & van Deventer, D. (1998). The arbitrage‐free valuation and hedging of demand deposits and credit card loans. Journal of Banking & Finance , 22, 249-272.
Lo, A. A Non-Random Walk Down Wall Street.
Malkiel. A Random Walk Down Wall Street.
Rebanato.
Sandberg, J. (2014). Black Scholes 2014. Retrieved from Pink Iguana: https://pinkiguana2.files.wordpress.com/2013/12/black-scholes-2014.pdf
Shreve, S. E. Stochastic Calculus for Finance 1, 2.
Wilmott, P. On Quantitative FInance.
Pink Iguana 