Quantitative finance is application of quantitative or mathematical techniques to the problems in finance.Modeling of price movements of stocks and other financial instruments, accurate pricing and hedgingo f financial instruments including credit based derivatives remains to be an important research area for the
world of finance.

At TCS innovation Labs - Hyderabad, our research spans from practical problems such as pricing and hedging of derivatives to abstract problems in stochastic calculus.

Research

Pricing and Hedging of Complex Derivatives

The primary focus of this research is to develop accurate methods of pricing and hedging. The pricing and hedging is based on arbitrage free concept assuming a stochastic model for price movements of the underlying assets. The standard Black-Scholes approach assumes a geometric Brownian motion for the underlying asset and the hedging is performed continuously. We made significant progress in development of a framework to determine optimal (minimum variance) hedge for a given contingent claim if the hedging is constrained to a (discrete) set of dates.

Future work will include pricing and hedging for the case where the underlying asset follows a more general model such as geometric Levy process. Inclusion of transactions costs and extensions of current research to American/Asian type claims will also be considered.

Risk Analytics

Accurate credit risk/default modeling and measurement of risk remain important problems in todays financial world. We are currently focusing on development of better models for credit defaults and their application in pricing of credit based derivatives.

Future work will involve computation of risk measures such as value-at-risk.

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