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 Apr 21 comment Online courses or C++ books combined with Finance (alternatives to Duffy and Joshi) Here's a more comprehensive list of "good" c++ books. Apr 21 comment Online courses or C++ books combined with Finance (alternatives to Duffy and Joshi) Accelerated C++ is a good introduction book to c++, that offers a birds-eye view. It's condense, informative and contains a lot of sample code. It does not treat any scientific / financial applications though, so that should come from somewhere else. Apr 16 comment How to hedge a barrier option with vanilla options? What's with the passive aggressive response? Apr 14 comment How to calculate Implied Volatility for out-of-the-money options? Strictly speaking the CDF $N(d_{1,2})$ is already not in closed form. Apr 8 comment Why the Black-Scholes formula can be used in the real world? Yes, you're right, but that's not what I meant. What I meant with "directly by the physical measure" is: pricing the option as a martingale with respect to the physical measure. So if we say that the price of the option follows from its expected discounted value ($V(t) = E[D(t, T)V(T)]$) with respect to the physical measure, then we have an arbitrage opportunity. Apr 5 revised Parametric VaR of a portfolio including a swap edited body; edited title Apr 1 comment Transforming 3M volatilities into 6M volatilities in EUR forecast curves I've looked into this. I'm pretty sure there is no accepted method for this -- I couldn't find one. The spread is essentially an expectation of counterparty credit risk, similar to the spread between an IBOR 3M and an IBOR 6M (the basis spread you are mentioning). You kinda see something similar in the swaption volatility surface. A (5x10) swaption overlaps with a (5x5) and a (10x5) swaption, but there is no way to determine the spread in volatility between these instruments using other instruments. Market quotes is all that matters. Mar 22 comment How to deal with negative ARCH terms? You should run a fitting scheme where you can put bounds on your parameters. In such a constrained optimization you might find an $\alpha_1$ which is positive and statistically significant. Mar 11 comment Las vegas method? Antonov works at Numerix, so this company is kinda pushing this terminology: Press release. Mar 11 awarded Curious Mar 10 asked How do you model yield curves for interest rates that have hardly moved? Mar 9 comment Which value to use as shape parameter for Black-Scholes lognormal distribution? As for the difference between scale and shape, you have to look at the pdf, see e.g. the wiki. With that expression you can explicitly identify the scale and shape like I did above; it's just a bit of work. Mar 9 comment Which value to use as shape parameter for Black-Scholes lognormal distribution? You can think of loc as the lower bound on the distribution. You know that $S=0$ is the lower bound on $S$, so loc should be zero. Mar 9 comment Which value to use as shape parameter for Black-Scholes lognormal distribution? So you need $P(S <= K)$ with $S$ the stock price, $K$ the strike and assuming lognormality on $S$, right? Then take lognorm.cdf(K, s=IV, scale=S_0 * exp(mu)) with mu your drift (e.g. $\mu = r T$ in the risk neutral measure) and S_0 your current underlying price. Mar 9 answered Which value to use as shape parameter for Black-Scholes lognormal distribution? Feb 24 comment Credit Valuation adjustment (CVA) Hedges A CDS comes to mind. Feb 8 comment Ito Formula for Stochastic Integral Woops. Removed the half-sentence. It was just more of the same: only integrals exists; there are no derivatives. Feb 8 revised Ito Formula for Stochastic Integral deleted 73 characters in body Feb 8 comment Why can CDS indices be used as a bond market index? "There are a metric ton of messy details here ..." Do you have any recommended resources on those details? Feb 8 revised What is the theoretical expected growth in an option's value over a given period of time? added 227 characters in body