Valuation of mortgage backed securities (MBSs) and collateralized mortgage obligations (CMOs) is the big science of the financial world. There are many moving parts, each one drawing on expertise in a different field. Prepayment modeling draws on statistical modeling of economic behavior. Data...

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...

The most widely used option pricing model is the Black-Scholes model.We motivate an alternative option pricing model called the Variance Gamma (VG) model and demonstrate its implementation in the Bloomberg system

We review and detail the causes of errors in numerical differentiation, including roundoff error, convexity error, cancellation error and correlated errors. We discuss methods for improving accuracy, including step size selection and smoothing techniques, as well as a number of approaches...

Lecture notes for a short course on FX option valuation. Includes: - Mathematical framework for FX valuation - Handling the smile and term structure for vanilla options (calls and puts): --- Interpolation issues and techniques --- Handling business time --- Handling market conventions - Pricing...

Tutorial on valuation of mortgage backed securities and collateralized mortgage obligations, including: - Structure of the mortgage market - Prepayment modeling - OAS analysis - Interest rate modeling - Numerical methods - Parallelization