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Mar
24
comment The Relation Between the Ricci flow and the Black-Scholes-Merton Equation
Oh and this Wikipedia article (en.wikipedia.org/wiki/Ricci_flow) has something about the connection to diffusion. But I doubt this is more than a superficial coincidence.
Mar
24
comment The Relation Between the Ricci flow and the Black-Scholes-Merton Equation
hmm, where did he write this, can you provide the citation? I actually doubt there is any real connection (no pun intended) but would certainly want to make sure that I do not contradict Mr. Perelman ;-) Oh and btw bond traders would not be the first who come up to mind when you mentioned the BS formulas.
Feb
6
comment Appropriate measure of risk if return are not normally distributed
I like the caveat "assuming returns have finite variance"!
Feb
6
comment Appropriate measure of risk if return are not normally distributed
There is a huge literature on this topic, freely available to you on the internet. For a start have a look at Wikipedia "Value at Risk" (en.wikipedia.org/wiki/Value_at_risk) and Expected Shortfall (en.wikipedia.org/wiki/Expected_shortfall). Entering "risk measures" or "measures of risk" in Google will bring up double digit millions of hits many of them quite helpful.
Dec
20
comment How to calculate confidence interval for option price?
What is the difference between "price at maturity" and "payoff"? I.e. between approach A and B?
Sep
28
comment Portfolio insurance strategy with path dependence
Unless you find something better you might want to look at Chapter 8 and 9 of "Stochastic Finance" by Föllmer/Schied. They say: "As a first preliminary step, we consider strategies of quantile hedging which stay on the safe side with high probability. In other words, we maximize the probability for staying on the safe side under a given cost constraint." Which is slightly different from your problem. Furthermore, they give somewhat general proofs, while you seem to be interested in a special case.
Sep
23
comment Longevity risk modelling
Yes, of course. For a start have a look at llma.org/home.html You find things under "publications". You might want to post a question for more specific questions.
Sep
10
comment Swiss Zero-Coupon Bond Yield Curve Data
Why was this downvoted?
Jul
21
comment How to discretize a GBM under P- and Q-measures?
Is it clear that the discretised discounted process also has the martingale property?
Jun
17
comment Lipschitz condition in mathematical finance
Questions about assumptions are relevant but if you want "rigorous" answers you should state it more carefully. What means "major" part and what is an "efficient" pricing model? We probably all agree that one does not need Lipschitz to calculate expected values. As Mark Joshi points out you might be able (or even need) to go a long way with somewhat weaker assumptions.
Jun
13
comment Distribution of Black Scholes call option price at time 0<t <T
Why is your $Q$ equal to the measure $P^*$ in the question?
Apr
14
comment Standard Formula for Solvency II
Have you googled "introduction to Solvency II" or similar terms? This should give you plenty of general information.
Mar
6
comment What does tradable asset mean?
Yes, my first thought was cash but I removed it. What is cash? If you think of physical notes made from paper then those would not fulfill the requirements of tradable assets. So a tradable asset should be electronic at least. And in comparison to S&P futures, where would the funds for a trade in those come from? But it is clear that bank deposits imply credit risk and this limits tradability. I am no expert on these more payment and settlement related questions and open to better suggestions. It might even make a good followup question.
Mar
3
comment What to use as portfolio diversification measure?
I agree with SRKX but would even go one step further. It does not make a lot of sense (at least to me) to discuss diversification unless you specify a risk measure. Then the perfectly diversified portfolio is one which minimises your particular risk measure.
Feb
7
comment Get distribution for aggregate loss using Monte Carlo
I am still not sure I understand because what you seem to want sounds somewhat unusual. Normally people fit frequency and severity and then simulate exactly to avoid doing a fit to the aggregate distribution. Why do you need a parametric representation of the aggregate losses, if you can simulate them?
Feb
6
comment Get distribution for aggregate loss using Monte Carlo
And by the way, given that losses from operational risk often are very heavy tailed, I would consider carefully whether a distribution for such losses should have finite variance
Feb
6
comment Get distribution for aggregate loss using Monte Carlo
Your question is not clear to me, what do you want to know: 1. Do you want to know how to do a Monte-Carlo simulation given a frequency and severity distribution? 2. Do you want to know how to calibrate a specific parametric distribution to your data at hand? Or do you want to know how to choose such a parametric distribution in the first place?
Jan
29
comment Which sports are generally the best for trading on betting exchanges for a profit?
Interesting read and good advice for beginners. Some of it should generalise to betting on other underlyings as well.
Jul
10
comment How to see the impact of one variable on a set of other variables?
Richard is right this sounds like a job for regression analysis. If you would like to bet money on the outcome be aware that you attempt a very difficult thing and there are many pitfalls. The main problem is the large number of potential factors and their complex and time dependent interaction. I guess you can start with any book covering regression and time series analysis. In addition there are a gazillion of academic and other papers. A quick search with the keywords "shocks" "equities" and "regression analysis" gave me about 6m hits
Jul
10
comment What are the implication of a negative risk-free rate on SML?
Second comment: Does CAPM still make any sense as a model if risk free rates are negative? One could hold cash in physical notes in a safe vault earning zero which means negative risk free rates create arbitrage opportunities. So the fact that negative risk free rates are possible at all can only be explained with features not contained in the CAPM model, such as the cost of safe bank vaults or the fact that there is no risk-free asset in the first place.