Mathematical Finance and Probability Seminars (Since covid these events are taking place online.)

Exotic interest rate derivatives are hard to value. Care must be taken to make sure that sources of volatility that impact the contingent claim are properly modeled, and that appropriate relationships are maintained between the underlying rates involved.

In this presentation, we outline the issues involved in valuing exotics. We review valuation issues for interest rate derivatives in general, and for caps, floors and swaptions. We outline a pricing methodology and apply it to Bermudan swaptions, range accruals, callable range accruals, spread options and callable spread range accruals. ________________ Harvey Stein is the head of the Quantitative Finance Research and Development team at Bloomberg LP. Dr. Stein graduated from Worcester Polytechnic Institute in 1982 with a Bachelor's degree in mathematics. After working at BBN for three years on developing and designing the precursor to the Internet, Dr. Stein went to graduate school at the University of California, Berkeley, where he studied arithmetical geometry while working at Wells Fargo Investment Advisors.Since then he has worked at Bloomberg developing valuation model for bonds with embedded options, mortgage backed securities, and other derivative securities, and building Linux clusters to supply these valuations to Bloomberg's customers.

Speaker: Harvey Stein, Bloomberg LP