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1answer
15 views

Measure difference between estimations and historic returns

For every day in a year, I have the return on an asset and the CAPM estimation for the return. I want to measure the average difference between the set of returns and set of estimations. So far, I ...
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0answers
79 views

PDE vs TREE vs MC vs Analytical

One what basis the pricing model can be differentiated for particular trade pricing. For exapmle why PDE or Binomial tree or MC or Analytical method will be consider for pricing any trade. Question ...
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0answers
340 views

Autoregressive distributed lag models ADL(p,q) howto in preferably matlab (stata/R/python/C# etc)

Could anyone provide me the details of how to determine the lag order of the distributed lags for an ADL(p,q) model in Matlab or another statistical package (and very much preferably in combination ...
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0answers
101 views

Markov switching model estimation

We are testing Markov switching models to forecast risk regimes, similar to the paper by Kritzman, Page and Turkington. We find that in some cases the Baum-Welch algorithm converges very slowly or not ...
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0answers
61 views

Incorporating a stochastic correlation structure into a multi-factor model

I am considering extending a multi-factor fixed income stochastic model (e.g. LIBOR-Market) to use stochastic correlation matrices instead of determinstic ones. For pricing instruments with short ...
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0answers
105 views

Recalibrating SABR parameters for Swaption ATM volatility

I understand that the ATM volatility of Swaption moves quite frequently and the SABR will need to be recalibrated. Which parameter should I recalibrate? Is there any financial meanings why we only ...
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0answers
203 views

Market Standard Pricing Models for Fixed Income Securities (Vanilla)

To clarify my heading, I have been searching for a material that consolidates all standard Fixed Income Security Pricing. E.g. ...
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1answer
35 views

Why is the forward rate used for the underlying in Black's model?

Why is the forward rate suitable for being used as the underlying in Black's model? Thanks
0
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1answer
49 views

GNP/GDP and modelling [closed]

Is GNP a continuous, static or a dynamic model ? What about GDP ? What I do know is that it has yearly discrete values. However, when it is modeled, it becomes a continuous graph. So what exactly is ...
0
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1answer
36 views

Motivation: Stochastic Interest rate model

what is a reason that someone might be interested in a stochastic-interest model such as the Chen model? Also can you provide me with a link to an easy to read motivational paper/part of a paper on ...
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0answers
75 views

residential mortgage prepayment modelling

I'm trying to develop a model for predicting prepayments, after reading several arcticles about it over the net. the model should use market data and be behavioral model (i.e. regression/survival ...
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0answers
25 views

Intermediate Project Presentation

I would like to know an ideal plan for explaining/representing Greeks (1st,2nd,3rd) order. The topic seems to be quite vast and very interesting but not possible to cover within a 15 mins time frame, ...
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0answers
72 views

How do you calculate the asset drift rate in the Merton model? (used in N(-d2))

Can I replace it with the internal rentability rate? I only have the financial statements and some market data, but I can't find the expected returns anywhere. The goal is to calculate the probability ...
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0answers
50 views

What interest rate dynamics would you suggest to simulate a single swap?

I need to calculate the Potential Future Exposure (PFE) for a single swap (not a portfolio). As far as I know, a stochastic model is needed to simulate the interest rate curves (from here). Could ...
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1answer
37 views

Common point between IR and Vol option pricing models?

What is the common point between pricing models on options on Interest Rates and options on Volatility?
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0answers
61 views

Sketching payoff diagrams- Straddle and Butterfly (when t tends to 0)

I want to sketch a straddle and a butterfly payoff diagram when t tends to 0. I have searched and have been able to sketch both a butterfly and straddle diagram but fail to proceed when t tends to 0. ...
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0answers
108 views

Stochastic Volatility for Stocks, FTSE

Can someone help me with calculating Stochastic Volatility (of stocks and options) using SAS or R or Matlab please? I am new to SAS and I am trying to use Heston model, White-Hull model or any other ...
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1answer
114 views

Where can I find data source for structural models?

I am starting a project to implement the Black-Merton-Scholes model from this book in R. However, I am looking for, ideally free, data sources. Still I have access to a Bloomberg terminal. Can you ...