8,379 reputation
931
bio website bachelierfinance.org
location United States
age 45
visits member for 3 years, 10 months
seen Dec 23 at 14:35

Worked in a lot of quant areas


Oct
1
answered Interpolating probabilities of default
Oct
1
answered Is it possible that a security with a positive variance can have a required return that is less than the risk free rate?
Sep
28
comment negative transition probabilities in the heston model
I can't really comment on the paper or the tree discretization in it, but trees seem like a pretty crazy way of solving the Heston PDE compared to implicit finite differences.
Sep
18
comment Solving Black-Scholes PDE using Laplace transform
It's perfectly legitimate to use the Laplace transform (and vonjd's linked paper does a fine job), but I've personally always preferred to solve the PDE by changing variables until the PDE turns into the standard diffusion equation.
Sep
15
revised What is Base- vs. Implied Correlation of a CDO tranche?
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Sep
12
revised What is Base- vs. Implied Correlation of a CDO tranche?
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Sep
12
comment What is Base- vs. Implied Correlation of a CDO tranche?
By "correctly price" I meant "matches the market price of". I'll update.
Sep
11
answered What is Base- vs. Implied Correlation of a CDO tranche?
Aug
12
revised CDS - Accumulated Default Risk?
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Aug
12
comment CDS - Accumulated Default Risk?
I agree, and will add a section on capital structure.
Aug
10
answered CDS - Accumulated Default Risk?
Aug
10
comment Discretization Schemes
I think your bias is reduced for every dimension in which you are using Milstein. But, if the two processes have "canceling" effects on the final result, you might be better off matching their discretization even if the match must be done at Euler level.
Jul
17
comment Arbitrage free implies complete market?
One often thinks of the cost of entering a position as the quantity $q$ times the difference $\nu$ between the offer (bid) and the midpoint. If the spread is $h$ then $\nu=h/2$, so I call it a half-spread.
Jul
17
answered Arbitrage free implies complete market?
Jul
2
awarded  Curious
Jul
1
comment What are the unfair order execution/routing advantages HFT firms apparently have?
It's probably worth adding that off-exchange (dark) pools, of which IEX is one, can make their own rules. IEX is not the only such entity violating price-time. Some dark pools subdivide their traffic into sub-pools according to client type, etc.
Jun
30
comment Self-financing and Black-Scholes-Merton formula
@Hansen unfortunately, as I say, ignoring the LCP is a "practioner thing" so references are rare. For example, I recall Monis doing this up through at least version 8.0, but to find out that fact I had to talk to the quants -- it was not in the documentation. Similarly for various internal investment bank pricing libraries. As to the policy iteration, I first saw a reference somewhere on the Wilmott forums around 2009(?), so you might start there.
Jun
27
comment Self-financing and Black-Scholes-Merton formula
PSOR tends to iterate the underlying Gauss-Siedel solver several times, especially if it hasn't been preconditioned with the "european" solution based on the naive exercise boundary (NEB). Many or most practitioners go to the extreme of completely ignoring the LCP and just applying the NEB, which introduces a fairly tiny error for most payoffs. A more efficient algorithm than PSOR to do this "right" is policy iteration.
Jun
27
answered Combining BHHH and Levenberg Marquardt
Jun
27
answered Common point between IR and Vol option pricing models?