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Models for simulating FX movements

My goal is to develop a model to simulate long term FX movements. (I am not sure if long term makes any difference, but if it does I am more interested in long term fx movements) These Monte Carlo ...
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86 views

Problems with exact Heston simulations

I am just wondering if there is any problem with the so-called "exact" Heston simulations? So far what I have seen are the good things about it, what are the disadvantages? Because if it is so ...
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2answers
196 views

Getting the next price of a GBM with reversion

Here is the "twin" question of Getting the next price of a GBM (Geometric Brownian Motion) but for GBM with reversion As in that case, I'd like to write a formula for the next price, as function of: ...
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32 views

Should earnings be modelled normally or lognormally?

I am having difficulty deciding whether a company's earnings should be modelled normally or lognormally. If we consider two arguments: (i) The earnings of a company are the returns on the assets of ...
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1answer
73 views

Getting Parameter of Translated Gamma Distribution from Monte Carlo

Spin-off from here. (Edit) Main question: What do I do about a parameter whose suggested values range quite vastly? (Edit) Backstory: I am given data of loss values and the dates that correspond to ...
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1answer
34 views

Compute moments of aggregate loss using Monte Carlo

Spin-off from here. Richard referred to me an article that tells me how to get parameters of a translated gamma distribution to which I should consider fitting simulated aggregated loss values. The ...
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1answer
136 views

Get distribution for aggregate loss using Monte Carlo

I am given two data sets containing dates and losses (in some currency). Given a distribution for the amount of losses and an (a,b,0) distribution for frequency of losses, how can I use Monte Carlo ...
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1answer
194 views

Getting the next price of a GBM (Geometric Brownian Motion)

I am writing a program that creates realizations of a GBM. Starting from an initial price, I get the following price with this formula: ...
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1answer
324 views

How do I simulate stock prices for a 10 asset portfolio, over a period of 10 years in MATLAB? [closed]

If I have given vectors for return and volatility (i.e. I have two 1x10 vectors), and I assume at first that their correlation is 0 (meaning my covariance-variance matrix is just diagonal), how do I ...
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What are commercial impact models and transaction cost analysis models out there for simulation?

I have heard that ITG, LiquidMetrix, MarkIT and TradingScreen has good Transaction Cost Analysis (TCA) research. I wonder which firm one would choose to have an impact model formula inside his ...
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59 views

Monte Carlo, convexity and Risk-Neutral ZCB Pricing

I've built a simplistic Excel monte carlo model to price a zero-coupon bond, but it came up with a slightly unepxected result so I wanted to confirm whether my maths is just a little rusty or my model ...
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1answer
39 views

Simulating a GBM with martingale condition - Ito process moving downwards

I want to correctly simulate a $\mathcal{Q}$ - martingale $S$, which is a geometric Brownian motion and an exponential of a process $X$, \begin{equation} X_t = X_0 + \mu t + \sigma B_t = X_{t-\Delta ...
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How to generate jump times in in Multilevel path simulation for jump-diffusion SDEs?

I am trying to generate jump times in in Multilevel path simulation for jump-diffusion SDEs using the following MATLAB code: I used following Algorithm in Yuan Xia paper: But I have not reached ...
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46 views

What interest rate dynamics would you suggest to simulate a single swap?

I need to calculate the Potential Future Exposure (PFE) for a single swap (not a portfolio). As far as I know, a stochastic model is needed to simulate the interest rate curves (from here). Could ...