Managing Risk of Exotic Products

Day One

Introduction
Arbitrage free pricing and model greeks
Moving beyond vanilla options
Reducing the volatility of your P&L
Modelling a volatility surface
Understanding how a volatility surface changes with the underlying
Sticky, floating and more exotic forms of delta
Managing Delta outside of Black Scholes
A taxonomy of exotic pricing models
The relationship between model choice and delta
Managing delta when you only use a single model
Delta risk management with multiple models
Coping with slow numerical methods
Hedging Vega
How do you define vega for exotic products?
Choosing a hedging instrument Option, Var Swap, or VIX
Alternative ways of measuring volatility sensitivities
Calculating a best volatility hedge
Principal component analysis and vega hedging
Parameter sensitivities and vega hedging
Correlation Risk
Products with correlation risk exposure
Measuring equity / equity correlation
What is a correlation smile
Measuring explicit correlation risk
Hidden correlation risk
Hedging correlation exposure
Day Two

Managing risk with scenarios
Difference between scenarios and stresses
Impact of liquidity ensuring futures risks can be managed
Relationship between scenarios and greeks
Ensuring consistency of your scenarios
Scenarios and barrier features
Fat tails and hedging extreme events
Managing Risk with Var
Risk drivers and Var calculations
Greek based Var and simulation based Var
What to do with risk not captured in Var
Impact of liquidity
Hybrid and cross risk
Measuring hybrid risk between an asset and interest rates
Explicit and implicit credit risk
Impact on one risk factor on another
Examples of cross risk in cliquet products
Switching risk
Stochastic Volatility and Volatility Convexity
When do you need a stochastic volatility model?
Reporting volatility convexity
Hedging volatility convexity
Managing a book of volatility products