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26
votes
2answers
6k views

How useful is Markov chain Monte Carlo for quantitative finance?

Naively, it seems that Bayesian modeling, structural models particularly, would be quite useful in finance because of their ability to incorporate market idiosyncrasies and produce accurate ...
7
votes
2answers
602 views

Should I use currency hedged or unhedged returns for a global equity allocation model?

I am building a global tactical equity allocation model. The model will help determine an optimal allocation amongst a number of major developed and emerging stock markets (represented for my purposes ...
2
votes
3answers
2k views

Why are exotic options most popular in FX?

I was reading Derman's latest blog post on Vanna Volga pricing, which, according to the linked Wikipedia article, is used mostly for pricing exotic options on foreign exchange (FX). This Willmott ...
5
votes
1answer
242 views

Multiple comparison problems

I recently read a blog entry where some statistics were generated for a common technical analysis indicator. Below is the link. My question shows up close to the bottom under the name bill_080, in ...
4
votes
1answer
968 views

Simple model for option premium (for covered call simulation)?

Given a historical distribution of weekly prices and price changes for a stock, how can I estimate the the option premium for a nearly at-the-money (ATM) option, say with an expiration date 3 months ...