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52 views

replicating strategy three step binomial

I am having some trouble setting up a replicating strategy for a call option with a three step binomial model (discrete). I have no trouble doing this in a two step binomial model by backward ...
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126 views

Simple Forward Interest Rate Proof

Just trying to check my logic here: Let $Z(t,T)$ be a Zero-Coupon Bond with maturity $T$ bought at time $t$, $S_m$ be the spot interest rate for time $m$ and $S_n$ for time $n$ respectively, where $n ...
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34 views

Reference Request: Trader Replication

I am looking for any reference where the following problem was addressed: given the list of trades of a trader teach an AI to replicate that trader's strategy. There are several well-known results ...
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27 views

Replicating portfolio: initial portfolio?

I have a bit of trouble understanding how to determine the replicating portfolio of a call using just a stock and the riskfree asset. I have times $t = 0,1,2$, and at time $2$, we have $3$ payoffs ($...
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18 views

Reading Recommendations on ETF's / “Factor certificates”

I'm looking for some good papers on exchange traded funds, especially on so called factor certificates (e.g. 2x underlying long, so when the underlying moves 1% the certificate moves by 2%). My ...
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24 views

Quantifing quality of cointegration

I'm trying to replicate instrument which is untradable. My approach is analysis of cointegration between it and three another time series (four variables in model) which correlates with it. I found ...
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67 views

Hedging American Derivative

Reading the book by Andrea Pascucci "PDE and Martingale Methods in Option Pricing", pp. 84, I found something that appears inconsistent to me. It concerns the construction of the optimal portfolio for ...