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Aug
7
comment Is there a strong solution to $\frac{dS}{S}=\sigma(S)dw$?
I hope someone else understands what you are asking and trying to explain.
Aug
7
comment Is there a strong solution to $\frac{dS}{S}=\sigma(S)dw$?
Ok, and why would you have a different volatility if S is < or > 1?
Aug
7
comment Is there a strong solution to $\frac{dS}{S}=\sigma(S)dw$?
one is independent of the other. The implied volatility surface expressed expectations of future return variations of the underlying. There are different interpolation techniques used in practice between two surface points but you still end up with one implied volatility measure. On the other hand the future stock price path is modeled through a separate process that can be driven by any number of Brownian Motions and a volatility measure. Whether a stock price path has discontinuities/jumps/whatever is expressed through the stock price model not the option model.
Aug
7
comment How to price an option with two volatilities?
why are there two volatilities?
Aug
7
comment Is there a strong solution to $\frac{dS}{S}=\sigma(S)dw$?
I still do not get why you would have two volatilities?
Aug
7
comment How to price an option with two volatilities?
...And is there any sort of relationship between you and the user of the following post because both ideas sound very similar. (quant.stackexchange.com/questions/8672/…)
Aug
7
comment Is there a strong solution to $\frac{dS}{S}=\sigma(S)dw$?
Am I smelling a push by some group/individual with certain undisclosed motivations to propose a new BS model? This sounds awfully identical to some earlier question where an idea was pushed without full disclosure. (quant.stackexchange.com/questions/8666/…). The earlier wiki-sandbox proposal looks similar in its idea to what you show, yet no data is shown that demonstrate that the suggested approach improves results over the standard BS model (en.wikipedia.org/wiki/User%3aStockequation2/sandbox)
Aug
7
comment How to price an option with two volatilities?
Could you please write down the exact payoff function? I am still massively confused: Are we talking about an improvement of the BS formula (in which case I think most market participants do not care much about because the current model is already known to be inaccurate and merely used as a translation tool, so unless a perfect model is proposed that removes all faulty assumptions it will be hard to propose a "little less inaccurace") or are we talking about a different derivative than a standard put or call?
Aug
7
comment How to price an option with two volatilities?
I do not clearly understand the payoff function of this derivative. How is it different from a regular barrier option? Do you mind explaining it a bit clearer or potentially write out the payoff function?
Aug
6
comment Looking for a recommendation for a Fund Transfer Pricing modelling book
Well, its not an easy topic, especially applied because its not purely quantifiable in practice.
Aug
6
comment Why are indifference equations in mean-variance portfolio theory convex shaped
I am afraid you need to elaborate because your "indifference curves", "utility curves" (whatever they are because you have not really defined them yet) are very off, meaning, of non standard shape. I would even argue that a trade-off between risk and return should not look like general utility curves at all. The more you increase risk the higher the chance your expected return is actually gonna be negative. Also, this should not be mean return but expected return in combination with volatility, which I assume reflects future realized portfolio variation and not historical one.
Aug
6
comment Looking for a recommendation for a Fund Transfer Pricing modelling book
@athos, the above I found the most valuable even after further sifting through couple more papers so there is unfortunately not more I found of value.
Aug
5
comment How to choose a rolling window type and size?
At the absolute core of any trading strategy should be a reflection of the admittance of total market dynamics. That means that there is no golden levels, no set parameters that optimize a strategy outcome over time. What works today may already stop working tomorrow. I would start with a verification of such dynamics and attempt to capture changes in dynamics and how you intend to react to those.
Aug
5
comment How does out-of-sample option pricing work in practice?
Indeed. They just isolated the parameters whose predictive power they want to test.
Aug
4
comment Black-Scholes in Delphi
so you posted code where there was no error?
Aug
4
comment Black-Scholes in Delphi
I do not see anything wrong with the BS formula itself. Did you verify matching parameter inputs, or, and I did not check in your solution, are you sure you assigned the values to the right value types, as wrong types may result in rounding errors or worse. By how much are you off?
Aug
4
comment Black-Scholes in Delphi
en.wikipedia.org/wiki/Cumulative_distribution_function
Aug
4
comment Black-Scholes in Delphi
BS is BS is BS, regardless of implementation language used. I venture to say, given you have double checked the formulae that you probably calculate the cdf incorrectly.
Aug
3
comment Liquidity and Prices
Google TCA (transaction cost analysis model )
Aug
3
comment Liquidity and Prices
yes, why would they not lead to lower market prices. I assume you mean execution related costs when you say "market prices"?