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 ...
For a vanilla option, I know that the probability of the option expiring in the money is simply the delta of the option... but how would I calculate the probability, without doing monte carlo, of the ...
If stock A has a 60% chance of rising, and stocks A and B have 80% correlation, what is the chance of stock B rising?
As in the subject, I'm interested in a math puzzle of sorts: If stock A has a 60% chance of rising, and stocks A and B have an 80% correlation, what is the chance of stock B rising? Would it be ...
Since Mandelbrot, Fama and others have performed seminal work on the topic, it has been suspected that stock price fluctuations can be more appropriately modeled using Lévy alpha-stable distrbutions ...
I am substituting reasonable values in the below fomula (like r=0.12, T=20, nColumn=16, sigma=0.004)...why is probability coming out to be greater than 1? Any help? Thanks! ...
I'm looking for a heuristic way to calculate the probabilities of being in the money at expiry for non-defined risk options combinations (listed options). I use delta as a proxy for this probability ...
A fairly naive approach to estimate the probability of drawdown / ruin is to calculate the probabilities of all the permutations of your sample returns, keeping track of those that hit your drawdown / ...
on “recovering probability distributions from option prices” - how to subtract influence of stochastic volatility?
This is based on a 1995 paper by Rubinstein/Jackwerth by the above title where the authors produces a distribution of stock prices inferred from option prices. But their approach only produces a joint ...
I have been thinking a lot about the following puzzle. But, could not arrive at a solution. Can someone explain me how can you get a fair (equal probability) outcome using only an unfair coin (where ...