5,924 reputation
21544
bio website blog.smaga.ch
location Hong Kong
age 28
visits member for 3 years, 10 months
seen 48 mins ago

Strats in a commodity trading firm in Hong Kong.


Sep
5
comment Convergence of GBM mean after simulation?
I am not an expert in MC simulation, but I believe that steps have their importance when using approximations of the model, like $S_{t+\Delta t}=S_t + \mu S_t \Delta t + \sigma S_t \sqrt{\Delta t} z_t$. And I simulate the steps because I am obviously interested in having the resulting path, not final price, for some risk analysis on a more complex process depending on GBMs.
Sep
5
revised What is wrong in this GBM simulation?
edited tags
Sep
5
reviewed Reject What is the required Risk/ Reward ratio in Forex?
Sep
5
revised Convergence of GBM mean after simulation?
edited tags
Sep
5
comment Convergence of GBM mean after simulation?
Besides, I'm not using the euler approximation here. So the number of steps I take won't change anything; I have the exact solution anyway...
Sep
5
comment Convergence of GBM mean after simulation?
I would, however, remove you last paragraph, as I think it's missing the point. Of course it works for low-volatility or short periods of times, I'm in particular trying to test what happens in more extreme cases.
Sep
5
comment Convergence of GBM mean after simulation?
Ok, this is a good answer, but it's still incomplete in my opinion. The variance and mean of the process are key. According to the central limit theorem, the mean of all $S_{300}$ is normally distributed with mean $\mathbb{E}[S_{300}]$ and variance $\frac{Var[S_{300}]}{n}$. These values can be computed as you illustrate.
Sep
5
accepted Convergence of GBM mean after simulation?
Sep
5
comment Convergence of GBM mean after simulation?
I understand what you say, but I think the problem would be exactly the same if I take $n = 300 \cdot \frac{1}{\Delta t}$ steps... (i assume $\Delta t$ is expressed as a fraction of a year here...)
Sep
5
comment News on ETF sector performance
How does that help about the ETF?
Sep
5
comment What would be a concise method to learn Monte Carlo methods?
Very interesting links, especially to the class notes, although I doubt this is perfectly legal.
Sep
5
revised What would be a concise method to learn Monte Carlo methods?
formatted the question
Sep
5
revised What would be a concise method to learn Monte Carlo methods?
retagged, rephrased question
Sep
5
revised How to draw a binomial option tree graph?
formatted the question and rephrased it
Sep
5
revised What is the required Risk/ Reward ratio in Forex?
removed question about posting this here.
Sep
5
comment What is the required Risk/ Reward ratio in Forex?
Hi SiXUIm. Welcome to Quant SE. As you might see in the faq, this site is dedicated to quantitative finance professionals and academics. "Beginner" (no offence) FX trading advises are off-topic here. Maybe some of these sites have forums or something of the sort.
Sep
4
comment Convergence of GBM mean after simulation?
Well, I agree that high volatility is the source, but I don't think it's a problem. In the end, the model should work alright even with high volatilities and long samples. I was trying to understand whether results looked rational for that kind of $\sigma$...
Sep
4
revised What do “Exposure Bounds” mean in Portfolio Optimization?
deleted 11 characters in body; edited title
Sep
4
asked Convergence of GBM mean after simulation?
Sep
3
accepted What is wrong in this GBM simulation?