(Un)Calculated Risk | by Peter Orr of Intuitive Analytics

Hull-White add Weight to New Interest Rate Modeling Research

Posted by Peter Orr on Apr 04, 2014

Last summer I wrote an article describing a missing link in rate modeling that had been discovered in exciting new research by Nick Deguillaume, Ricardo Rebonato, and Andry Pogudin entitled The nature of the dependence of the magnitude of rate moves on rates levels: a universal relationship. This mouthful offered two simple takeaways. First, accurately capturing how rates are expected to change, particularly over long time horizons, is central to every rate risk management decision we face. And second, that so-called “standard models” that don’t provide for the observed fact that rates tend to change differently depending on their level aren’t so realistic nor as a result, very good at informing interest rate decisions like refunding opportunities.

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Refundings Show Finance Profs How to Colossally Screw-Up Finance

Posted by Peter Orr on Oct 09, 2013

"To confuse the model with the world is to embrace a future disaster driven by the belief that humans obey mathematical rules."  - The Financial Modeler's Manifesto, Emanual Derman and Paul Wilmott

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2013 Discovery - The Missing Link in Interest Rate Modeling!

Posted by Peter Orr on Jun 20, 2013

"There is no logical way to the discovery of these elemental laws. There is only the way of intuition, which is helped by a feeling for the order lying behind the appearance."  - Albert Einstein

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50 Years of UST Yields - How Well do Forwards Predict?

Posted by Peter Orr on May 17, 2013

"Despite its role in...finance, the expectations hypothesis (EH) of the term structure of interest rates has received virtually no empirical support." - Predictions of Short-Term Rates and the Expectations Hypothesis, Federal Reserve Bank of St. Louis

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The ‘Formula that Killed Wall Street?’ or ‘Know A Bad Rate Model When You See It’

Posted by Peter Orr on Jun 19, 2012

"Copulas are generally an early doodling activity in an area." - Anonymous Street quant

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Financial Software: The Good, the Bad, the Ineffective

Posted by Peter Orr on Dec 31, 2008

"The dividend of the computer revolution to us did not come in the flooding of self-perpetuating email messages and access to chat rooms; it was in the sudden availability of fast processors capable of generating a million sample paths per minute."

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Are Financial Models Worthless? Risk and Uncertainty…

Posted by Peter Orr on Dec 23, 2008

"Risk comes from not knowing what you're doing."

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