Reputation
320
Top tag
Next privilege 350 Rep.
Access review queues
Badges
1 9
Newest
 Yearling
Impact
~6k people reached

  • 0 posts edited
  • 0 helpful flags
  • 2 votes cast
Mar
1
comment Modelling callable bonds in a risk model (historical simulation)
Callable bond requires term structure simulation, maybe a tree pricer. Tree is calibrated to market instruments as best as you can. The risk neutral concept is based on bunch of assumptions- no need to get here-, but at least puts pricing in a framework where many people agree on...
Feb
29
comment Non-parametric estimator - CVAR / Expected shortfall
what is R.V.? What do you mean by consistent estimator for Expected Shortfall? As if sounds like most CVAR estimators are not consistent??
Feb
29
comment Vol surface changes as underlying moves
Shocks are bit too much to keep the vols same. I am assuming you are building a short horizon model, if stock price moves down by 30%, vols should go crazy. Why not look into some other models, such as Heston or SABR? Or build an empirical vol stock price model based on extreme moves in the past, which would be my first choice to try
Feb
26
comment Modelling callable bonds in a risk model (historical simulation)
There are two things here. HS requires risk factor simulation, then you need to price the callable bond at each scenario of HS. Pricing is risk neutral
Feb
25
comment Want to understand the links and relationship between all the risk metrics?
very complicated question, RWA is influenced by credit/market/operational risk, etc.
Feb
25
comment credit risk - How to calculate the probability of default (private companies)?
Most of the time logistic regression is used to estimate PD
Feb
11
comment CDS spread scenarios from historical market data
Your 750 is completely arbitrary :) Banks prefer using recent data for VaR, thus it is based on latest 252 days. Stressed VaR will use 252 days of a stressed period. 10 day returns are the standard. There are 1000s of factors in a typical VaR portfolio, usually if one factor is regime switching its affects will be ignored.
Feb
11
comment Extracting IB market data: bid and ask for greeks and IV
If there is low interest or volume, they should not be used to build curve
Feb
10
comment Extracting IB market data: bid and ask for greeks and IV
Why do you think IV cannot be larger than 1? Volume of trades, and open interest is available in yahoo; but open interest is not divided by bids and asks. You need active trade data which will give you number of bids/ask at different bid/ask levels and order counts
Feb
10
comment CDS spread scenarios from historical market data
Please give reference of the regulation which requires for Market Risk VaR more than 252 data points
May
5
comment What is the hedging underlying of MBS
What do you mean by optimal monte carlo? Duration matching is usually the standard. I know some also use swaptions to match the increase in the swap yields (which is linked to prepayment speed)
Mar
24
comment List of financial derivatives Ito's Lemma does not apply
American, ok. Can you explain why prices cannot be following a process derived through Ito? It is not clear to me which underlying Ito assumption is broken by the early exercise
Mar
23
comment List of financial derivatives Ito's Lemma does not apply
@pbr142 There is a version of the Ito process for the discontinuous stochastic processes. Yes the question is about the price of a derivative, not the final payoff. The discontinuity in the final payoff does not limit the application of Ito derivatives to figure out the price of an option.
Mar
23
comment List of financial derivatives Ito's Lemma does not apply
where $df(X_t)$ is not following Ito diffusion process
Mar
22
comment List of financial derivatives Ito's Lemma does not apply
Please give an example real trade that we cannot use Ito. Here I believe one considers the value of the derivative from initiation to final time point. Thus discontinuity at maturity does not make application of Ito inappropriate
Mar
8
comment Which interest rate model for which product
It is known that once you start to estimate the dynamics more than weeks at most a month, any of these models will fail. Thus even though the risk management portfolio is the most complicated beast, practical applications of LMMs, and SABRs are limited.
Mar
8
comment Which interest rate model for which product
The model to use depends on the purpose of the pricing. If you're long and short caps at different maturities, you need a model that captures the term structure of volatilities. If you are trading out of money vols, then you need a model that captures the volatility vs strike dynamics. In reality the risk management applies to the whole portfolio, thus you can say models should be most complicated to capture the dynamics between the different factors. Though there is a trade-off of the model risk.
Mar
7
comment How to prove that markets are incomplete under the Stochastic Volatility model?
The volatility change of $dS$ does not make process of $S$ non martingale. It needs to add a drift to $dS$. I think you need to clarify that point
Mar
5
comment measuring the performance of round-trips on stocks
what is your funding cost?
Mar
4
comment How to calculate modeled asset volatility by industry factor?
Is this question about GCorr? If so, yes it uses a factor model approach. moodysanalytics.com/~/media/Insight/Quantitative-Research/…