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Analysis and Optimization of Derivative Portfolios with MATLAB

Bryan Liang, Bloomberg LP

The derivatives market has experienced significant changes since the recent financial crisis. A lot of efforts have been made to improve its safety, transparency, and efficiency. In this session, we look at an often overlooked but vital component of the derivatives market: its initial economic purposes, as tools for risk mitigation and alternative investment. Many financial decisions are based on the same ingredients: defining a subjective view, exposure, scenario generations, risk/utility criterion, and possible trades/products. We present a unified framework that incorporates all these ingredients and enables us to efficiently analyze, compare, and optimize investment and hedging strategies using derivatives. The main objective is to achieve better alignment of product to need/view. In this presentation, we demonstrate a MATLAB prototype we have recently developed that encompasses many aspects of derivatives, from payoff definition and pricing/calibration to risk analysis, back testing, and optimization, together with many innovative and flexible interactive and visual tools based on MATLAB GUIs.

Product Focus


Recorded: 23 May 2013