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To get it out the way: you cannot ask 'what model is better' without a reference to what its use is. Do you want to test for the mean or the AR parameter to trade it? Do you want to calculate VaR? Do you want to forecast volatility over one period? Or over 1000 periods? Or higher moments? Do you want to simulate volatility over one period? Or longer? For ...


A good rule of thumb is to "test" your models by doing forecasts and to choose the best one. Note however that your choice will be based upon the loss function you selected. If you are concerned about outliers you should (for instance) use Median Squared Errors, if you don't you can use Mean Square Errors. In your particular case the Information Criteria ...


This error message indicates you are not using the correct Ox console release. Every oxo is compiled for a particular ox console version/release. So you need to install the Ox console wich fit with your oxo.


The price difference is so large -- that the only possible reason is that you have spot and strike confused between the two functions. And indeed: R> fOptions.BAW <- BAWAmericanApproxOption(TypeFlag, S, X, Time, + r, b, sigma, title = NULL, description = NULL) R> quantlib.BAW <- AmericanOption("call", X, S, b, r, Time, + ...


You need to use more dimensions. If the number of dimensions (i.e. steps) is large, you may also have to use a Brownian bridge as described in the book by Joshi or J├Ąckel.


First let me say that in the Black-Scholes model as you have it, there is of course no need for intermediate steps when pricing vanilla calls, since the SDE has the closed-form solution you included. Intermediate steps would be required for complicated payoffs or other SDEs. To answer your question though, you do need to use additional dimensions. Think ...


You can do that with the blotter package. We use it to reconcile our trades. It's only available on R-Forge, so see this stackoverflow question for how to install it. Run the "amzn_test" demo for an example of how to use it: library(blotter) demo(amzn_test)

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