Financial writings


Synopsis of career as quantitative analyst

My first job in finance, for Berkeley-based Financial Engineering Associates, was to revise and extend a Monte Carlo engine for valuing financial derivatives. I learned a lot about derivative models and parlayed this experience into a job in New York with Smith Barney which, after a series of mergers, ultimately became Citigroup. I became a specialist in analyzing financial derivatives models. For the most part, I was on the risk side of the firm, rather than the trading side. New models and problems came at me on a daily basis for over ten years. Although I probably wrote more analytical and technical works in finance than I did in physics, the reports I generated are considered proprietary by my employers and cannot be shared. To give a flavor for the topics on which I worked I list the title of reports I authored. A typical report pertains to a particular derivative model, relevant to a particular risk system, relevant to a particular geographical location at which that particular model was used. In almost all cases, in order to assess the assumptions and limitations of a model being used by the trading desk, I developed an independent version of the model under review.

While this website will have notebooks relevant to derivative models the treatment will be generic rather than specific to any proprietary model. In truth, most of the major financial institutions use the same methodologies to develop and implement their derivative models. It is in the calibration of these models to market conditions and in the development of techniques for hedging portfolio risk that proprietary issues arise.

Model Risk Analysis Reports
FS Double Barrier – Comsys 29-Aug-07 [New York]
Nat Gas Vanillas – Openlink 08-30-06 [Houston]
Linear Products – Openlink 06-01-06 [Houston]
Power Options – Openlink [Houston]
Interest Rate Futures – EQRMS 07-Feb-06 [London]
Linear Power Products – Openlink 01-12-06 [Houston]
Average option – EQRMS 19-Oct-05 [London]
Economic Capital Equity Investments 26-Sep-05 [New York]
Early Redemption Bond – DRMS 07-11-05 [Tokyo]
NYQstar vol surface -EQRMS 21-Mar-05 [New York]
Valero structure Comsys 01-Feb-05 [New York]
SpreadModel – EQRMS 01-Nov-04 [London]
Tokyo Generic Barrier – DRMS 31-Aug-04 [Tokyo]
Equity Market Value Adjustments  21-Jul-04 [New York]
Targets Options – DRMS  25-Jun-04 [New York]
Equity Put Swaption – DRMS 09-03-03 [Tokyo]
Single Cap Models -EQRMS 6-03-03 [London]
Floored Asian – DRMS  03-11-04 [New York]
Rainbow – DRMS  09-24-03 [New York]
Digitals with Volatility Skew – DRMS 2-27-03 [New York]
Stop Loss Forward – EQRMS 11-21-02 [London]
Contingent Forward – DRMS 7-31-02 [New York]
Best-Worst-Rainbow – EQRMS 7-01-02 [London]
Barrier Options – Imagine 10-4-00 [Australia]
Variance-Volatility Swaps – DRMS 9-13-00 [New York]
Callable Note – EQRMS 6-7-00 [London]
Outperformance – EQRMS  4-5-00 [London]
Vanilla European Options – DRMS 2-14-00 [Tokyo]
Vanilla American Options – DRMS 2-14-00 [Tokyo]
FX-Strike – EQRMS 12-16-99
Basket Buffer Note – Hype -Ext#9 Single Futures 12-19-07 [New York]
Cross Currency Asian – Openlink 12-05-07 [Houston]
Heston Seasonal – Hype 11-29-07 [New York]
Asian – Openlink 11-21-07 [Houston]
Extendable N-way Quantos – Hype 10-15-07 [New York]
Basket Buffer Note Hype -Ext#9 AutoCallable 10-11-07 [New York]
Gas Physical Options (AECO) 10-03-07 [Houston/Canada]
Standard Options for Commodities Comsys – Extension to Softs 09-13-07 [London]
Basket Buffer Note – Hype -Ext#7 (Hype for softs) 09-12-07 [New York]
Resettable Range Accrual Option – Comsys 07-30-07 [New York]
Basket Buffer Note Hype -Ext#6 (TARN) 07-10-07 [New York]
Variance Swaps on Commodities – CEI 06-11-07 [Houston]
Heston Plus – Hype 05-29-07 [New York]
Asians on nonseasonal commodities – Comsys 09-Apr-07 [New York]
Extendable Quantos – Hype 01-27-07 [New York]
ERCOT TCRs – CEI 12-26-06 [Houston]
Basket Buffer Note Under Zeus Note – Hype 12-20-06 [New York]
Cracktions and Swaptions – Comsys 18-Dec-06 [New York]
Spread Options – Openlink 10-10-06 [Houston]
Asians on nonseasonal commodities – Comsys 06-Sep-06 [Houston]
Gas Daily Options – Openlink 08-30-06 [Houston]
Average Rate FX Options – Comsys 06-06-06 [New York]
Index Swaps Hedging – Stockfacts Pro 09-May-06 [New York]
FS Double Barrier – Comsys 08-May-06 [New York]
Heat Rate Option – CEI 20-Apr-06 [Houston]
Citicurve vol surface model – EQRMS 14-Feb-06 T Gladd [New York]
… Dozens more prior to 2006 when I didn’t bother to keep track 

Special Reports
Essay on Errors Associated with Derivative ModelsOCC white paper 01-16-07 (with Martin Goldberg)
Use and Misuse of Risk Sensitivities – OCC white paper 01-16-07 (with Martin Goldberg)
Energy Model Risk 05-31-05 talk
Monte Carlo Error Analysis 12-04-03
Single Factor Quadrature Models