AN EXCLUSIVE TWO-DAY WORKSHOP
PAUL WILMOTT & NASSIM NICHOLAS TALEB
LONDON

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THE UNIQUE MERGING OF A QUANT WHO BECAME TRADER AND A TRADER WHO BECAME A QUANT
THE TWO MOST ANIMATED TEACHERS INSIDE AND OUTSIDE THE DERIVATIVES AND RISK MANAGEMENT WORLD
“LIKE LEARNING FROM ARISTOTLE...TWICE!!!”

Course benefits:
• Two days with the two most influential derivatives practitioners
• Learn about blow ups and how to avoid them
• A focus on the wrinkles of practice by those who have most influenced applied derivatives thinking
• Restricted class size to maximize interaction and allow individual attention
• Learn from the author of Paul Wilmott on Quantitative Finance
• Meet Nassim Nicholas Taleb, author of Dynamic Hedging

Who should attend this course
• Derivatives professionals who want an extra edge
• Risk managers who need to figure out things not in books and equations
• Experienced traders who want some perspective
• Sell-side managers who want to see where their money is at risk
• Buy-side managers who want to improve their risk/return profile

COURSE CONTENT

DAY 1

Morning: Intuition behind the pricing

• The simplest possible option valuation method
• Where Black-Scholes comes from
• How hedging should work, and why it doesn’t
• Interpretation of the models
• The famous equation and what it means to the trader
• What are we assuming and why?
• Implied volatility and actual volatility
• Which volatility should you hedge with?
• Don’t trust vega
• Buy side versus sell side: Who’s doing what, why and with whom
• How the buy side prices and the sell side values
• The win-win situation

Afternoon: Where the Real World does not resemble the formulas

• The main source of errors
• Discrete hedging
• Unknown parameters
• Tracking of derivatives pricing methods: What formulas tend to miss
• State variables like volatile interest rates
• Credit
• Convexity and generalized convexity, including stochastic volatility
• What does stochastic volatility means?
• Other sources of hidden convexity
• Transaction costs, execution, feedback and microstructure effects
• The effect of transacting on the total risk
• The effect of options on the strikes

DAY 2

Morning: Volatility

• Volatility problems: Estimation, definition
• A problem most practitioners miss: what is volatility?
• Different representations
• The Problem of Non-normality
• Effect on the tails
• Difference between volatility and variance

Afternoon: What can go wrong will go wrong

• Extreme Markets
• Crashes happen, it’s a case of ‘when’ not ‘if’
• Non probabilistic, worst cases
• Overview of the issues in a variety of markets:
• Fixed Income
• FX
• Equities
• Hybrid

Conclusion

About Paul Wilmott:

Dr Paul Wilmott has been described by the Financial Times as the cult derivatives lecturer.

He has for many years been a financial consultant specializing in derivatives, risk management and quantitative finance. Dr Wilmott received his D.Phil. from Oxford University in 1985. He is the author of Paul Wilmott Introduces Quantitative Finance (Wiley 2000) and Paul Wilmott on Quantitative Finance (Wiley 2001). He has written over 100 research articles on finance and mathematics.

Dr Wilmott runs www.wilmott.com, the popular quantitative finance community website, the quant magazine Wilmott and is the Course Director for the Certificate in Quantitative Finance, www.7city.com/cqf.

Paul Wilmott is a partner in the volatility arbitrage hedge fund Caissa Capital.

About Nassim Nicholas Taleb:

Nassim Nicholas Taleb works at the intersection of theory and practice. He started his career as a trader (which includes the Chicago pits) and subsequently became involved in the unique combination of applied research and trading.

He is the founder of Empirica LLC a volatility research laboratory and trading operation in New York. He is also a fellow at the Courant Institute of Mathematical Sciences of New York University where he has been lecturing on the risks in derivative models since 1999.

Taleb held trading positions with major derivative houses (CSFB,UBS, Paribas, Bankers Trust among others) and worked independently on the floor of the Chicago exchanges. His education includes an MBA from Wharton and a PhD from University Paris-Dauphine. He was inducted into the Derivatives Strategy Hall of Fame in 2001.

Taleb is the author of Dynamic Hedging (Wiley 1997), and Fooled by Randomness (Texere 2001). Fooled by Randomness has been published in 11 languages, and has been the subject of 125 newspapers articles reaching 40 million readers, something unprecedented for a finance book.

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