The tag has no usage guidance.

learn more… | top users | synonyms (1)

18
votes
5answers
920 views

Model Validation Criteria

Let's say I have a brand new fancy model on some asset class (calibration porcedure included over a set of vanilla options) in which I truly believe I made a step forward comparing to existing ...
14
votes
4answers
3k views

Is there a standard model for market impact?

Is there a standard model for market impact? I am interested in the case of high-volume equities sold in the US, during market hours, but would be interested in any pointers.
6
votes
1answer
788 views

Multi Fractals Models

From a quant point of view, how would you explain Multi Fractals Models in few words ? I have the level to take these courses, but won't be able to do it next year, so I want to know what I am missing....
39
votes
7answers
3k views

Paradoxes in quantitative finance

Everyone seems to agree that the option prices predicted by the Black-Merton-Scholes model are inconsistent with what is observed in reality. Still, many people rely on the model by using "the wrong ...
23
votes
5answers
3k views

Why aren't econometric models used more in Quant Finance?

There is a big body of literature on econometric models like ARIMA, ARIMAX or VAR. Yet to the best of my knowledge practically nobody is making use of that in Quantitative Finance. Yes, there is a ...
5
votes
4answers
2k views

Typical coefficients uses in square-root model for market impact

The square-root model is widely used to model equity market impact. It assumes that volatility, traded volume, total volume, and a spread cost are the drivers of slippage. Jim Gatheral has an ...
9
votes
3answers
1k views

Implementing a Fast Fourier Transform for Option Pricing

So, I'm in need of some tips regarding a small project I'm doing. My goal is an implementation of a Fast Fourier Transform algorithm (FFT) which can be applied to the pricing of options. First ...
15
votes
2answers
555 views

Which interest rate model for which product

Given the multitude of existing interest rate models (ranging from simple to very complex) it would be interesting to know when the additional complexity actually makes sense. The models I have in ...
2
votes
2answers
443 views

Ideas about Stochastic volatility models

I am currently working on comparing different models for modelling the volatility and then pricing vanilla options (I use option prices on real stocks in order to calibrate my models and then I ...
16
votes
2answers
1k views

Why isn't the Nelson-Siegel model arbitrage-free?

Assume $X_t$ is a multivariate Ornstein-Uhlenbeck process, i.e. $$dX_t=\sigma dB_t-AX_tdt$$ and the spot interest rate evolves by the following equation: $$r_t=a+b\cdot X_t.$$ After solving for $X_t$ ...
5
votes
1answer
131 views

What are the empirical limitations to testing market efficiency?

I have encountered a rather elegant argument about the limitations of empirically testing for market efficiency, involving the central point that we do not know whether a result is due to the "true ...