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Aug
14
comment Good criteria to sort state-space $\beta_{t}$ according to Kalman filter output
I am not exactly clear what your question is, do you mind rephrasing it a little or expanding on it? Thanks
Aug
14
comment How popular is the IRR as a tool for capital budgeting, nowadays?
thanks for explaining. Well, I can certainly add my take and references, though it will not be from a corporate finance practitioner's perspective.
Aug
13
comment How popular is the IRR as a tool for capital budgeting, nowadays?
I do not see any other SE site that may match with what you are looking for. Sorry I cannot help further
Aug
13
comment Partial Least Squares Discriminant Analysis
A simple google search gives you all you need. First 2 pdfs: enpub.fulton.asu.edu/cseml/06summer/pls_dis.pdf, users.stat.umn.edu/~sandy/courses/8801/articles/pls.pdf
Aug
12
comment Industry convention to track trading performance against market indices?
a) because what if you deposited 200 throughout the year (and had in no way accounted for that) then you would not have generated a return 20% but of 0%. b) What if your fund rose 20% but with a maximum drawdown of 50% and wild swings while the Dow returns were very steady with low variations? A case can be made that some may prefer to invest in the Dow even though it yields less. Can you imagine that there are people who are offered but reject to play a game to either win 1 mln USD with a probability of 99% or lose their lives with 1% probability? You need to build risk into your equation.
Aug
9
comment How popular is the IRR as a tool for capital budgeting, nowadays?
I used hurdle rate in a very loose manner, sorry for the confusion. If there are otherwise no other required rates then an example of "hurdle rate" would be 0%, meaning, the project is expected to be net profitable. But then as mentioned I have ever worked in corporate finance and so please excuse my incorrect usage of terminology.
Aug
9
comment How popular is the IRR as a tool for capital budgeting, nowadays?
Without knowing for sure I would reckon that IRR is still used in one form or the other because in the end IRR really just measures some kind of "hurdle rate" and the question becomes is this a return that overcomes the cost of funding, the required return, a competing return. In the end that is what most everyone is concerned about whether it be personal finance, trading, funding, capital budgeting. But it is just a hunch and definitely does not qualify as answer so maybe someone with direct knowledge can add more value...
Aug
8
comment Industry convention to track trading performance against market indices?
Unless I have overlooked something no assumption was made how the closing account balance reflects deposits and withdrawals and thus I made the assumption that it was adjusted higher by deposits and lower by withdrawals and that d/w are made post trading each day. Will edit to be more specific about the assumptions. Thanks for pointing out.
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.