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Jul
22
comment How useful is the genetic algorithm for financial market forecasting?
@DarrenCook one issue I see is that if you test from t-N to t and find it doesn't work well, then you're going to create another model that gets tested on that same time period t-N to t (ad infinitum). That introduces the likelihood of "meta"-overfitting during the model creation process.
Jun
15
comment Physical or Real-world Probability Measure
This is all standard terminology. I'd consult standard references here.
Jun
15
comment Physical or Real-world Probability Measure
Shreve is not asserting you can have TWO probability measures as part of ONE probability space. If your point is that you can have multiple measures on the same measurable space, that's true and what Shreve is saying.
Jun
15
comment Physical or Real-world Probability Measure
@MattWolf I find it strange that you refer to two random variables on the same probability space as representing probability measures. You can use THE probability measure that defines the probability space to take probabilities of events involving the random variables. That doesn't mean random variables are probability measures per se.
Jun
15
comment Physical or Real-world Probability Measure
@MattWolf I doubt Shreve uses a nonstandard definition. The standard definition of probability space is as AFK stated. Check Wikipedia.
Apr
26
comment Braess's paradox in quantitative finance: When optionality leads to lower value…?
Well the whole point of the braess paradox is that there are other participants and you have to anticipate their reactions to your choice.
Feb
11
comment Is Geometric Brownian Model suitable for long term price forecast?
I'd read up on Schiller's CAPE ratio.
Dec
30
comment Switching from C++ to R - limitations/applications
Very complete answer!
Dec
29
comment Machine Learning on matlab 2010
How are your Matlab programs doing cross-validation on a time-series? You can't just do 10-fold CV (or whatever) as normal, since you shouldn't be training on future data and testing on past data.
Nov
25
comment Understanding the concept of Martingale pricing
"Many papers say that stock prices are best modeled using a geometric Brownian motion (GBM)" Actually I doubt many papers say this, as stock prices aren't best modeled with GBM.
Mar
18
comment Doesn't a perpetual option contradict the Black-Scholes framework?
@Alexey, I'm not sure I understand. Dynamically hedging the perpetual put would require shorting the stock for arbitrary lengths of time, would it not?
Mar
18
comment Doesn't a perpetual option contradict the Black-Scholes framework?
@Freddy, I didn't say that. I said "if".
Mar
16
comment Doesn't a perpetual option contradict the Black-Scholes framework?
That's my point though. If shorting stock for arbitrary lengths of time is not allowed, then how can you delta-hedge this perpetual option? And if you can't delta-hedge the option, how is the price you get under risk-neutral pricing argument the price?
Mar
15
comment Doesn't a perpetual option contradict the Black-Scholes framework?
Freddy, yes, I'm aware it's a theoretical construct, and my question is a theoretical one. Is that not appropriate for this site? Also, please rest easy that I am occupying the bulk of my time with other thoughts. :)
Nov
24
comment Why do ATM call options have a delta of slightly bigger than 0.5 and not 0.5 exactly?
Using r=0 is a great simplification that shows the real "culprit" behind the greater than 0.5 delta.