What are the formulae for d1 & d2 using a Laplace distribution?
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 ...
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 / ...
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 ...
In the world of finance, Risk-neutral pricing allow us to estimate the fair value of derivatives using the risk free rate as the expected return of the underlyings. However, the behavior of ...
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 ...
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 ...
May you can help me undertanding the following conclusion: Suppose we have an agent who has preferences over contingent claims, represented by a concave function $U$. This simply means that ...