Matching the market: Calibration and the working practices of quants

Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)peer-review

Abstract

In February 2011, a number of sociology bloggers noticed something peculiar in the financial statements of the American Sociological Association (ASA), the non-profit association for sociologists in the United States. Front office derivatives quants represent a subset of financial quants whose work is focused on developing models that are used by traders and other banking personnel within dealer banks to price and risk-manage over-the-counter derivatives. A major use of models is to produce information for hedging, which is primarily needed by a dealer bank's traders and risk managers. These groups use models to understand the sensitivity of the bank's derivatives trading book to changes in interest rates and market prices. This chapter examines some of the day-to-day working practices of front office derivatives quants: the physicists, mathematicians, and engineers who build models and pricing infrastructure that are used within dealer banks to both hedge and track the changing fair value of banks' derivatives positions.
Original languageEnglish
Title of host publicationFinance at Work
EditorsValérie Boussard
PublisherRoutledge
Chapter2
Pages42-56
Number of pages15
Edition1
ISBN (Electronic)9781315470290
ISBN (Print)9781138204034
DOIs
Publication statusPublished - 2017

Publication series

NameRoutledge International Studies in Money and Banking

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