Dec 2, 2022Simulation of correlated random walks for a basket of stocks using PythonBackground In many quantitative finance applications, we frequently generate random walks to build the path of a certain asset that follows a stochastic process. By far the most popular model for simulation of a stochastic process is the geometric Brownian motion (GBM) for simulating the path of a single equity stock…Simulation4 min readSimulation4 min read
Oct 19, 2022Foundations of Numerical Methods — the Pythonic wayBackground Numerical Methods by definition mean the application of a certain analytical technique to solve a certain problem. From quantitative modelling point of view, there are many problems for which we do not have a ready formula (i.e., a closed form solution). For such instances, we have to resort to some…Numerical Methods6 min readNumerical Methods6 min read
Oct 6, 2022Matrix Algebra to solve Linear Equations with PythonBackground Most of us have solved set of linear equations at a certain point of time in our lives — be it in school, undergraduate or postgraduate level. These type of problems were commonly referred to a set of simultaneous equations. …Matrix Algebra4 min readMatrix Algebra4 min read
Jul 31, 2022Demystifying Risks in FX MarketsBackground: Foreign Exchange (“FX”) as an asset class is a key component of the global financial markets. The size of the FX market is humongous given the level of trading activity witnessed in this market. The interesting part about FX is — it’s a market that is open throughout the trading…Foreign Exchange6 min readForeign Exchange6 min read
Jul 22, 2022Understanding Credit DerivativesOverview of Risk existing in the market Risk is the uncertainty in any transaction. Risk may manifest itself in multiple forms including market risk, credit risk, operational risk, compliance risk etc. Over the years, banks and financial institutions have become risk aware which is evident from the increased investment towards strengthening of their overall risk management infrastructure…Credit Risk6 min readCredit Risk6 min read
Jun 17, 2022Capital Requirements for Operational Risk for BanksBackground: Capital is the fuel for any business be it banking or otherwise. An organization requires capital for a variety of purposes including: 1. Exploring new business opportunities 2. Maintaining a strong balance sheet position 3. Regulatory requirements 4. Overcoming market stresses to continue as a going concern The above mentioned…Banking5 min readBanking5 min read
Apr 28, 2022Exposure Monitoring methods by BanksBackground: Exposure Monitoring is a key component of risk management for banks and lending institutions. At an enterprise level a bank will decide its risk appetite / risk tolerance. There are various ways in which the risk appetite is inculcated in every action that the bank takes — be it…Exposure5 min readExposure5 min read
Mar 11, 2022Methodology for Credit Value Adjusted (CVA) Capital Charge calculationBackground: This article is a part of the series of articles pertaining to regulatory capital charge for banks that I had published a couple of months back which spoke about the technique for computation of Capital charge for fixed income products And also the methodology to calculate the Capital Charge…Risk Capital5 min readRisk Capital5 min read
Feb 4, 2022Capital Charge for Market related Off- Balance Sheet exposuresFor any business, capital happens to be key component from the point of view of growth and stability. A bank that is well capitalized is better positioned to pursue new business opportunities, enhance customer experience, and most importantly stay robust in times of market stress; all of which leads to…Basel5 min readBasel5 min read
Dec 22, 2021Pricing Commodity Options with PythonGlobally, the options market is huge. Options trade on both: Organized Exchanges and the much bigger Over the Counter (OTC) market. Further, this derivative product can have any asset as the underlying. When I say any asset, it means that once the counterparties to the options contract agree on using…Quantitative Finance4 min readQuantitative Finance4 min read
