7,663 reputation
826
bio website bachelierfinance.org
location United States
age 45
visits member for 3 years, 2 months
seen 4 hours ago

Worked in a lot of quant areas


Dec
27
answered How to test for and how to simulate price rise/fall asymmetry in the stock market
Dec
27
answered How to hedge a bull call spread
Dec
27
answered Simulating property price index
Dec
20
revised How do you estimate the volatility of a sample when points are irregularly spaced?
remove univariate
Dec
20
comment How to apply quasi-Monte Carlo to path-dependent options?
From the point of view of densities this is a 1-dimensional problem, so Milstein would work. It would greatly reduce but not eliminate the negative values. However, the square root process is so tractable that there's an analytic expression for the density, so there's no need to use these Euler or Milstein approximations at all.
Dec
19
comment How do you estimate the volatility of a sample when points are irregularly spaced?
This technique is most often used for more complex models than Black-Scholes, but it works fine here as well.
Dec
19
revised How do you estimate the volatility of a sample when points are irregularly spaced?
Fix for historical data
Dec
19
revised How do you estimate the volatility of a sample when points are irregularly spaced?
formatting
Dec
19
revised How do you estimate the volatility of a sample when points are irregularly spaced?
add sigma to arguments
Dec
19
answered How do you estimate the volatility of a sample when points are irregularly spaced?
Dec
16
comment Calculating Theta assuming other variables remain the same
@Ray: you can calculate the rate of change under the assumption that the stck price stays constant. That is the traditional theta formula. However, if the stock price moves so as to bring the option closer toward the money (while still remaining out-of-the-money) then the option price may well increase.
Dec
14
comment Models for measuring insurance risk exposure
The infamous copula models used by the structured credit traders here in the world of finance were introduced to us by David Li, who had gotten them from the insurance industry.
Dec
8
comment performance of historical VaR parameters
VaR is easily computed using R packages...you could probably cook up your own backtest in about 40 lines of code.
Dec
6
comment How to apply quasi-Monte Carlo to path-dependent options?
Ah. They are not being very smart and are simulating the CIR integrated square root process SDE by Euler approximation rather than using the actual density. Also note they were not doing any kind of bridge for CIR there, though now that I think of it one could Euler approximate a bridge in principle.
Dec
6
comment How to apply quasi-Monte Carlo to path-dependent options?
Is the post-processing necessary? Granted I am only guessing the CIR math is tractable enough to form bridge distributions analytically but if it is then you are guaranteed positive rates when using it. How were you thinking to do the bridge where you would get negative rates?
Dec
6
comment Are there “live” uses of the Generalized Method of Moments or are they all academic?
I tend to think of GMM as a generalization of Maximum Likelihood, rather than thinking of Maximum Likelihood as an application of GMM. Mainly because ML estimation precedes GMM in so many ways.
Dec
6
answered How to apply quasi-Monte Carlo to path-dependent options?
Dec
5
comment Are there “live” uses of the Generalized Method of Moments or are they all academic?
Quite right. One does occasionally see historical data being used for model calibration in, e.g. loan and CLO markets where there are no derivatives to calibrate to. However I don't think any of the models employed there are sufficiently intractable to require GMM.
Dec
5
comment Modeling interest rates with correlation
For what it's worth, if he is trying to model interest rates with, say, a 1 week horizon then GBM is not a horrible approximation. The mean reversion term would be negligible over such a period.
Dec
5
answered How to reduce variance in a Cox-Ingersoll-Ross Monte Carlo simulation?