Stage 3A - Validation of the Mid-curve swaptions priced with Gaussian Copula model
Who we are:
Murex is a global fintech leader in trading, risk management and processing solutions for capital markets. Operating from our 18 offices, 2400 Murexians from over 60 different nationalities ensure the development, implementation and support of our platform which is used by banks, asset managers, corporations and utilities, across the world.
Join Murex and work on the challenges of an industry at the forefront of innovation and thrive in a people-centric environment. The team:
You will become a part of the Front Office Trading Product Development Domain (PDD) which is at heart of MX.3 software evolution, where you will integrate the Financial Engineering team. Our multi-cultural team designs, validates and delivers Murex Advanced Analytics (MACS) which is a combination of rich catalogue of derivative products covering all asset classes, a large set of models for evaluation and risk management of derivatives.
We work closely with the quant development and integration teams to enhance our products and models. We provide our quantitative expertise and collaborate with FO Trading PDD teams like EQD, Non-Linear Rates, FXD, COM, etc. to build trading solutions. Similarly, we assist Client Services and regional offices across the globe to provide cutting edge solutions to our clients. What you'll do:
European swaption is a popular vanilla IR option, which gives a right to enter in a spot starting swap upon exercise and commonly evaluated with Black/Bachelier formula. Mid-curve swaption is a very similar product but it is exercised in a forward-starting swap. This seemingly mild difference changes the nature of the product, giving its holder convexity and correlation exposure.
Mid-curve swaptions are commonly evaluated via decomposition of underlying forward-starting swap in a spread of spot-starting swaps. However, the resulting spread bears stochastic weights which depend on annuity ratios. Furthermore, spot-starting swap rates are not martingales under the forward-starting annuity measure. Naïve approach is to freeze annuities i.e., consider weights to be deterministic, and suppose that spot-starting swap rates are martingales under the forward-starting annuity measure which produces arbitrageable prices.
Murex recently implemented a new model which addresses both issues. The new model must undergo internal model validation, as a mandatory step before it can be incorporated in the official model catalogue.
Under supervision of the Front Office Financial Engineering team, you will work together with the Model Validation team, to conduct the model validation.
More precisely, you will elaborate and execute a test strategy to;
- Validate theoretical model assumptions
- Validate accuracy and robustness of the model
- Validate calculation of Greeks
- Benchmark performance of the model
The ultimate deliverable of your mission is a model validation document summarizing the tests results, as well as a list of model gaps and limitations.
Validation activity will be mostly conducted via a web service using python for execution of tests and visualization of results. Who you are:
Why you should join us:
- You are in the last year of a master's degree looking for a 6-months internship
- You are passionate about technology and financial mathematics
- Strong academic background in a quantitative field (Computer Science, Engineering, Physics, Mathematics)
- Understanding of stochastic processes and financial mathematics
- You practice python
- You can efficiently communicate in multicultural environment: English is a must
- You have strong analytical and problem-solving skills
- A multicultural community united and passionate
- Complex challenges
- Continuous training
- Glassdoor top ten French employer