1 / 14

Insights into Quantitative Risk Analytics at ABN AMRO: Careers and Key Financial Instruments

This document provides an overview of the Quantitative Risk Analytics (QRA) department at ABN AMRO, led by Ton Vorst. It details the team structure, consisting of 56 staff members, primarily Ph.D. holders, based mainly in Amsterdam, London, and New York. Key activities include validation of trading and credit risk models, development of trading strategies, and consultancy services. The text also explores financial instruments such as stocks, options, and bonds, highlighting risk assessment techniques, including risk-neutral valuation and Monte Carlo simulations. It touches on career development programs and industry engagement.

dane-dodson
Télécharger la présentation

Insights into Quantitative Risk Analytics at ABN AMRO: Careers and Key Financial Instruments

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. ABN AMRO Price of Risk Ton Vorst Global Head of Quantitative Risk Analytics October 7, 2005

  2. Quantitative Risk Analytics • Staff: 56(roughly 50% Ph-D’s) • Most in Amsterdam (roughly 25% foreign). Some in London and New York • Activities: Validation of Trading Models, Credit Portfolio and Counterparty Risk Models, Quantitative consultancy • After a while people move to other positions within ABN AMRO

  3. Other Positions within ABN AMRO • Development teams for trading models • Asset Management and Asset Allocation • Department of Economics • Developers of rating models

  4. ABN AMRO Career Career Development Programs. • Introduction Course (+/- 6 weeks) • Industry conferences / courses

  5. Financial instruments Product Analysis within QRA Equity (stock: KPN, Shell, IBM,…; indices: AEX, DJ, Nikkei) • Currency (Foreign Exchange, FX) • Interest rates (Bonds, LIBOR) • Commodities • Derivatives: Futures, Options

  6. ABN AMRO Wereldwijd KoopkrachtGarantie Note 2005-2015 EUR 100,000,000 Capital Protected Securities Linked to the Performance of an Inflation Index and Basket of Indices, due 2015 • 125% of your investment • Equal purchasing power of your investment • 75% of market rise + your investment back Best of

  7. ABN AMRO Wereldwijd KoopkrachtGarantie Note 2005-2015 • The purchasing power of your investment HICP - Harmonised Index of Consumer Prices excluding Tobacco 20%

  8. ABN AMRO Wereldwijd KoopkrachtGarantie Note 2005-2015 • 75% of Market Rise Basket value

  9. Option Option payoff Gain/loss Option 100% Stock Stock value Stock value 100 100 -100% Three types of financial instruments: • Bank account (virtually risk-less) • Share (moderate risk) • Option (very risky)

  10. Risk neutral valuationOne step binomial model S(1)=110 V(1)= 5 S(0)=100 V(0)= ? S(1)=90 V(1)= 0 • We create a portfolio: • A number of shares, Δ • Sell one option with strike 105 and unknown value V(0) • The value of the portfolio P(t) = Δ·S(t) – V(t) • Find Δ such that value of portfolio, P(1), is independent of the stock value • Stock goes UP: P(1) = Δ·110 – 5 • Stock goes DOWN: P(1) = Δ·90 – 0 • UP = DOWN follows Δ·110 – 5 = Δ·90 and Δ = 0.25 • P(1) = 22.5 • Risk-less portfolio must earn the risk-free interest rate, say 5% per year • Portfolio value today is P(0) = 22.5/e0.05×1 = 21.4 • Option value today V(0) = 0.25·100 – 21.4 = 3.6

  11. Risk neutral valuationRisk neutral world • Risk neutral valuation can be generalized: • We can assume that all assets grow with the risk-free interest rate, if we can hedge all risks • Mathematically, this corresponds to using a “risk free measure” • Put it in a mathematical form where r is the risk free interest rate. The risk free interest rate is used to calculate a future value and to discount them.

  12. Mathematical methods • Trees (binomial, trinomial) S(1)=121 V(1)=16 • Monte Carlo S(1/2)=110 V(1/2)= 9.8 S(1)=99 V(1)= 0 S(0)=100 V(0)= 6.0 S(1/2)=90 V(1/2)= 0 • Partial differential equations S(1)=81 V(1)= 0 • Analytical solutions (Black-Sholes equation, for example)

  13. References • Probability theory • Stochastic calculus • Measure theory • C++, MATLAB,… • John Hull, Options, Futures, and Other Derivatives • http://www.wilmott.com (Forums)

  14. ABN AMROQuantitative Risk Analytics Group Market Risk Management Quantitative Risk Analytics Ton Vorst Market Risk Modelling & Product Analysis Credit Risk Modelling & Product Analysis Quantitative Consultancy & Operations Research

More Related