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Dec 25

Friday reading list 12/25/09

Posted by abiao at 16:18 | Others | Comments(0) | Reads(4629)
Have little time to read paper this week due to Christmas holiday, so only two are selected on this Friday's reading list:
1, Smile Dynamics IV. Recall we have collected the three simle dynamics paper by Lorenzo Bergomi, Quant of the Year 2008 awarded by Risk Magazine at lorenzo bergomi smile dynamics I, II and III, this is his fourth version. "In this paper we address the relationship between the smile that stochastic volatility models produce and the dynamics they generate for implied volatilities. We introduce a new quantity, which we call the Skew Stickiness Ratio and show how, at order one in the volatility of volatility, it is linked to the rate at which the at-the-money-forward skew decays with maturity. We then focus on short maturity skews and (a) show that the difference between realized and implied SSR can be materialized as the P&L of an option strategy, (b) introduce the notion of realized skew." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1520443

2, What Drives Interbank Rates? Evidence from the Libor Panel. "The risk premium contained in the interest rates on three-month interbank deposits at large, internationally active banks increased sharply in August 2007 and risk premiahave remained at an elevated level since. This feature aims to identify the drivers of this increase, in particular the role of credit and liquidity factors." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1517680

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