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seen Nov 8 '13 at 21:14

Feb
8
comment QuantLib in industry
Done that for you :D
Feb
8
comment How do banks actually make money on mortgages
How can they do it? I mean, mortage is an upfront expense for the bank, so they must have 100% of the cash to provide it to the home buyer.
Feb
8
awarded  Supporter
Feb
8
comment What concepts are the most dangerous ones in quantitative finance work?
This estimate is a function of time in the future. You re-estimate this function each day, as you said.
Feb
8
answered QuantLib in industry
Feb
7
answered Solving Path Integral Problem in Quantitative Finance using Computer
Feb
7
awarded  Critic
Feb
7
comment What concepts are the most dangerous ones in quantitative finance work?
But... nobody assumes "constant drift and volatility" in practice. Did you mean "deterministic"?
Feb
7
comment What concepts are the most dangerous ones in quantitative finance work?
This is quite vague.
Feb
7
comment What concepts are the most dangerous ones in quantitative finance work?
Interesting. Can say more about the dangers in backtesting?
Feb
6
comment What concepts are the most dangerous ones in quantitative finance work?
Of course, you can develop models which follow the main lines of the BS framework but take into account transaction costs, discrete rebalancing and also jumps.
Feb
6
awarded  Teacher
Feb
6
comment What concepts are the most dangerous ones in quantitative finance work?
I would contradict this by saying that one can say that the market is efficient or not even in the presence of transaction costs, irrational behavior or slow information diffusion. All you need is SOME rational investors, SOME spread of information and the ability for the Rationals to make money off the Irrationals. You can read more about it in the first chapter of Rebonato's "Volatility and Correlation" book.
Feb
6
comment What are the limitations of Gaussian copulas in respect to pricing credit derivatives?
The Wired article is basically false. The crisis was only superficially related to problems with copula models. The main reasons were: - systematic mispricing of mortgage-related derivatives in the US market, due to reliance on false information (NINJA borrowers lying about their income), ultra-optimistic assumptions (one rating agency assumed that house prices will be increasing forever) and ignoring of counterparty risk - the so-called "monoline debacle", where banks lost billions of dollars by massively underestimating the counterparty risk of insurance they bought on super-senior tranches.
Feb
6
answered What are the limitations of Gaussian copulas in respect to pricing credit derivatives?
Feb
1
comment How useful is Markov chain Monte Carlo for quantitative finance?
Sorry, what is MCMC?
Jan
31
awarded  Precognitive