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Derivatives pricing in C++, automated trading in Scala.


21h
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
Right, my point is that there exist binomial models for non-recombining trees where your $ud=1$ condition doesn't hold, which still converge to a price as $\Delta t \rightarrow 0$.
1d
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
researchgate.net/publication/… seems to be regarding non-recombining binomial trees for options pricing, but I haven't read the paper.
1d
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
I'm pretty sure the condition for it to be convergent in the way you describe is just that the step size must be ~ $\sqrt{t}$. If you start assuming a log-normal process and constant volatility, that's when you start to get boxed into particular parameterizations.
1d
comment Is it fair to assume $(ud=1)$ in the binomial tree option pricing model?
CRR's condition ud=1 leads to a recombinant tree, but binomial trees need not be recombinant, they are just much easier to calculate when they are.
Sep
27
answered Option pricing ? Where to get the dividend yield from?
Sep
24
awarded  Autobiographer
Sep
16
comment How to select optimal betting strategy from backtest?
To add, why not use a clustering algorithm on the resulting profitable parameter vectors and then select the point in the center of the largest cluster?
Sep
16
answered Why should we expect geometric Brownian motion to model asset prices?
Sep
13
comment Algo's Shadowing Limit Orders
I think you might mean "Lo and behold"
Sep
8
comment Basic question on LIBOR-OIS swap
Fed funds is the US overnight/OIS rate
Sep
7
answered Incoherence in Bloomberg Data in Swap Curve Builder (ICSV)
Sep
6
comment Efficient Markets Paradox
Indeed. I think most of the emh stuff assumes a rational convex utility function over wealth, which is most likely not the case for most people. Eric Falkenstein has been a proponent of relative wealth utility functions being more likely, which leads to a much different landscape.
Aug
28
answered Algorithm to detect the aggressor side of a trade
Aug
22
comment ADR vs Foriegn Stock Price Arbitraguers
fordschool.umich.edu/rsie/workingpapers/Papers526-550/r533.pdf is a study of this mechanism of evading capital controls.
Aug
22
comment ADR vs Foriegn Stock Price Arbitraguers
That concurs better with the current unofficial rate: twitter.com/SoberLook/status/501082814260211712 Perhaps people are using the ADR to get USD out of the country somehow?
Aug
21
comment What is the reasoning to derive this financial model called the Vasicek Model?
As I understand it, it was a pretty basic rationale - the short interest rate is mean-reverting, and they just supposed Gaussian diffusion. The OU process was well-known, tractable, so why not?
Aug
20
comment Approximation of different volatilities
I believe Pat Hagan did some work like this for his SABR model too, wilmott.com/pdfs/021118_smile.pdf formula A.64 may be relevant.
Aug
18
comment Testing for the presence of a positive or negative gamma effect
Maybe try a high-frequency hurst exponent test?
Aug
16
comment Calculating short/long order percentages?
You will not be able to tell short orders from sell orders, and furthermore, it doesn't look like you have any trade data at all. All you have is orders to sell and orders to buy. The problem you are going to (eventually) have is you cannot determine whether a reduction of the size on one side of the order book is caused by a fill (someone selling via taking liquidity) or by someone cancelling their resting buy order (possibly in anticipation of buying via taking liquidity).
Aug
11
comment How good is managed code for algo trading?
FWIW these days, anyone doing trading on the JVM will eventually be investigating Azul's Zing JVM, which features absolutely pause-less GC