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Patrick Hagan onFixed IncomeLondon 23 & 24 February 2012New York 27 & 28 February 2012 Course Highlights: Using the SABR model to manage volatility smiles and hedging stability Market technicals: money vs. scrip, leverage, cost of funds and the credit crisis Managing exotic risks: choosing a model and the five main interest rate risks Practical pricing of exotics: calibration strategies and instruments Adjusters and risk mitigation Pricing and hedging callable range notes and accrual swaps www.incisive-training.com/patrickhagan
The course his course looks at Fixed Income in today’s investment banks. He has designed this courseT volatile market conditions. It provides apractical and technical approach to managing to address the industrys need to adapt its approach to Fixed. This masterclass will offerthe various risks involved in Fixed Income, with practical insights whilst remaining mindful ofcontent driven by real-world implementation recent market turbulence and change.strategies. The main motivation for delegates attendingThe agenda addresses the practical pricing this course will be to learn the correctissues of Fixed Income and cutting-edge application of models and to execute morehedging techniques. effective Fixed Income strategies.The course will be led by Patrick Hagan, a The course will address how to develop,leading expert in the area of Fixed Income calibrate and validate models in order tomodelling with a wealth of experience in minimize and manage model risk andbuilding trading models at many international guarantee robustness. Who should attend? Key Learning points This course has been designed for those Assess the use and application of the working in investment banks, hedge funds, SABR model insurance companies, consultancies and Develop your understanding of the regulatory bodies with the following job titles: practical pricing of exotics Risk managers Risk analysts and controllers Explore the strengths, weaknesses and Derivatives analysts uses of HJM models, BGM models, Quantitative analysts LMM models, short-rate models and Treasurers Markovian models Financial engineers Investigate mis-hedging, mis-pricing Market risk managers and the need for risk migratorsAbout the tutor Patrick S. Hagan, structuring and managing derivatives. Before Head of Quantitative Analytics for entering finance, he helped design chemical JP Morgan’s Chief Investment Office reactors for Exxon, was a scientist for Los Alamos’s Theory and Computer Research & Patrick received his BS and Ph.D. in Applied Applications groups and was the Deputy Director Mathematics from the California Institute of for the Los Alamos Center for Nonlinear Science. Technology. Before joining JP Morgan he worked He is a former Director of the US Industrial Study for several banks and third party software Group, has taught at Stanford University, the providers designing trading systems, as well as California Institute of Technology and the Courant developing the component models, calibration Institute (NYU) and is an Adjunct Professor at methods and numerical algorithms for pricing, several other institutions.
Patrick Hagan on Fixed Income and Credit London 23 & 24 February 2012 New York 27 & 28 February 2012 Day one Day two 09.00 Registration and coffee 09.00 Registration and coffee 09.30 Basic fixed income instruments 09.30 Practical pricing of exotics Basics: discount factors, FRAs, swaps, and other delta products LGM model Curve stripping, bucket deltas, and managing Callable swaps (Bermudans) IR risks Calibration strategies and the selection of Martingales & the fundamental theorem calibration instruments Vanilla options (caps, floors, and swaptions) Connection between calibration & Black’s model instruments and vega risks Vol matrices, bucket vegas, and managing Explicit calibrations for Bermudan vol risks Predicted vs. actual vol matrices for Smiles, local volatility models, and equivalent different calibrations volatilities Mishedging, and the development of the Dependence of Bermudan price on stochastic vol model choice of calibration instruments Using the SABR model to manage volatility Dependence of hedges on calibration smiles, hedging stability choices Levy based models for managing volatility Conclusions surfaces 11.00 Morning Break 11.00 Morning break 11.30 Speed networking: a chance to meet 11.45 Adjusters and risk migration each delegate and share backgrounds Mis-hedging, mis-pricing, and the need for 11.45 Intermission: market technicals risk migrators money vs. scrip Price sharpening via adjusters holiday calendars, business day rules, and Example: correcting a Bermudan calibrated schedule generation to ATM swaptions day count fractions Example: correcting a Bermudan calibrated ref rates & basis spreads to caplets leverage, cost of funds, and the credit crisis 13.15 Lunch 13.15 Lunch 14.15 Managing exotics 14.15 Pricing/hedging callable range notes & Three elements to modern pricing: model, accrual swaps calibration, and evaluation Definition of the deal Choosing a model and the five main interest Mismatched payoffs & convexity corrections rate risks Using replication to price non-callable range HJM models – strengths, weaknesses, usage notes BGM/LMM models – strengths, LGM model and potential calibration weaknesses, usage strategies Short rate models – strengths, weaknesses, Potential mishedging of swaption or caplet usage risks Markovian models – strengths, weaknesses, Using internal adjusters to correct prices and usage hedges 15.45 Afternoon break 15.45 Afternoon break 16.15 Review of day’s content Technical review 16.15 Review of course content Discussion Technical review Common problems faced Discussion Strategies to overcome common mistakes Action points 17.00 End of day one 16.45 End of the coursewww.incisive-training.com/patrickhagan
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