Time and Location: 7:30pm on 18th September 2008 at Yn Ynnyd Chegney (see directions below)
Speaker: Dr Ben Fairfax
Abstract (subject to change): Consider the pricing and risk analysis of structured products and other listed derivatives, whereby perhaps not pure arbitrage but at least model dependent arbitrage opportunities occur of a limited capacity and for a limited time period. I will illustrate and detail some of the pricing models and then go on to work through some particular examples. This topic is of particular interest to me at present since the extreme lack of liquidity (cash) and general bank sector distress, has resulted in clear model driven arbitrage opportunities occurring in the (secondary) structured product and securitized derivative markets. There are instances of structured products trading at approximately 15% under their embedded (OTC) derivative prices (using JP Morgan models and calibration), with this value is certain to be captured within 4 years at maturity. By carefully bundling such products with uncorrelated and negatively correlated risk parameters, and hedging any residue risk one can construct (statically) a portfolio with a risk profile slightly above cash with an expected yield of up to 10 per cent.
Aim: The presentation will provide an insiders explanation of how protected equity products are constructed, priced and distributed. We will also consider a robust framework in which quantitatively consistent judgements of at least the relative value of various (retail and institutional) structured investment products can be made.
About the Speaker: Ben is originally from England and was educated at the Universities of London, Cambridge and MIT (US). After completing his PhD is 1999, he established WebCab Components (http://www.webcabcomponents.com) which provides quantitative finance solutions to banks and investment managers including RBS, Goldman Sachs, Barclays,…. Since 1996, Ben has been an active quantitatively driven investor within credit, equity and derivative markets, and has also worked (2001-2002) as a quantitative analyst on an investment bank derivatives trading floor. Since 2002 he has managed accounts for family members and in March 2007 established an IoM based multi-family office Foresight Capital Partners Limited which manages funds for family members and third parties within equity, structured product and near cash mandates.
Directions: The presentation will take place at Yn Ynnyd Chegney, which is the Department of Education Language facility on Old Church Road, Crosby. From Douglas take the main road to Peel and turn left immediately after Crosby Post office. Follow the road up the hill YYC is the first building on the right towards the top of the hill.
