The probability tag has no wiki summary.
2
votes
1answer
196 views
What are $d_1$ and $d_2$ for Laplace?
What are the formulae for d1 & d2 using a Laplace distribution?
29
votes
5answers
1k views
Lévy alpha-stable distribution and modelling of stock prices.
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 ...
13
votes
2answers
564 views
How do you distinguish “significant” moves from noise?
How do you distinguish between losses that are within the normal range for day-to-day shifts and situations with a real potential for loss? The specific application I have in mind is pattern ...
13
votes
5answers
895 views
How to estimate the probability of drawdown / ruin?
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 / ...
6
votes
1answer
300 views
What distribution should I apply to estimate the likelihood of extreme returns?
Say I have a limited sample, a month of daily returns, and I want to estimate the 99.5th percentile of the distribution of absolute daily returns.
Because the estimate will require extrapolation, I ...
4
votes
2answers
436 views
Heuristics for calculating theoretical probabilities of being ITM at time T for listed options
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 ...
