Please note this scheduled meeting has been changed from the discussion meeting at our regular place in midtown to an IAFE event on TUESDAY!

This is to accommodate more time for individuals to read on the below project details to construct a volatility surface for the next meeting.

Research project: "Creating a volatility surface"
Please see projects for further details.
http://nyfinancialeng...

Please read up and attempt as best you can to create a volatility surface using the existing specs for next meeting after this Tuesday.

In the meantime I've found an interesting talk given by the IAFE that we can attend as a group.
Please see below for details and do not forget to register online!!!

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Hedging Illiquid Assets

A Liquidity Risk Committee Event
Tuesday, October 21st
Goldman Sachs
32 Old Slip
New York

5:30 Registration
6:00 Program Begins
7:30 Reception

Presentation By:
Peter Rappaport, JP Morgan Securities

Discussant:
Steve Allen, Fellow, Masters in Mathematics in Finance Program, Courant Institute, New York University and IAFE Board Member

Hedging in liquid markets requires no hard choices: the hedge ratio is the same whether designed for a day or a quarter, and quarterly value at risk is simply a scaled-up version of daily. This equivalence has enabled financial institutions with long time horizons to manage earnings at risk on a daily basis. Following this “liquid markets” recipe in illiquid markets can be disastrous.

Recent experience in the U.S. leveraged loan market illustrates: the hedge that looks best over a day is nevertheless very risky over a quarter. In fact, it is five times more risky than the best hedge over a quarterly horizon. On top of this, a liquid markets perspective underpredicts by 50% the capital required by this hedge over a quarterly horizon. These and other pitfalls result because the relationship between the fundamentals of the asset and hedge only emerges in the long run; in the short run it is masked by stale prices. In other words, in illiquid markets, the long run is not simply the sum of short runs. Risk management must make the hard choice of whether to hedge for the short or long run.

Registration:

This event is free, but registration is limited. All attendees must register by 5pm on Monday, October 20. Please click here or visit www.iafe.org to register for this event.