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visits member for 3 years, 8 months
seen Oct 9 at 12:21

Dec
21
comment Simulating conditional expectations
if your dimension is high I would not recommend finite difference scheme, (I repeat) no optimal stopping problem so Logstaff and Schwartz isn't of any help here.
Dec
9
comment How to show that this weak scheme is a cubature scheme?
@stonybrooknick : thank's that really helps. Why didn't I thought about that before ??
Dec
2
comment Value of option-free instruments with a short-rate model vs the spot curve
@ user1443 : I don't understand your example, where exactly do you use a model in this example ? Otherwise for convexity sensitive instruments (for example Libor futures) you might need a model to calculate a convextiy adjustment but there is no options involved in the product itself.
Nov
23
comment Taking into account the correlation in Barrier options on a Basket
I guess the stocks in your basket, are each following a geometric browian motion, is that right ? Even in that case you can't get closed form formulas, and you have to use approximations. Regards
Nov
21
comment What is the replicating portfolio of swaptions for a constant maturity swap (CMS)?
@kmcoy : beside my answer I think that you should ask more precise questions once you have read this paper where the static no arbitrage hedging procedure is clearly exposed. Best regards
Nov
18
comment Convexity of BS Equation for Call and Put
What you have shown is that for any $\sigma$ there's a strike $K_{max}$ at which BS Formula is not convex (treating at the same time Call and Put case). That's nice and smart I accept this answer. Thx.
Nov
8
comment What distribution to assume for interest rates?
You could try a discretisation of CIR process, which should give you a non central chi-square distribution if I remember well.
Oct
31
comment How to value a floor when a loan is callable?
@Tal: Hi, I think it would help if you could write explicitly the cashflows. First you could write them without call,then using a backward induction by setting the callability option at the last fixing,and adding callable dates, you should be able to obtain by dynamic principle a solution for the problem. Best regards.
Oct
26
comment Which is a more appropriate choice of risk measurement in a utility function, CVaR or VaR?
@ QuantGuy : Hi I used to be a not so big fan of VaR compared to ES essentially because VaR is failing axioms of risk measures, but I attended a lecture where Cont has shown duality between robustness/some axioms of risk measures and this has led me to reconsider VaR in the picture as a not so bad but "to handle with care" risk measure. This duality prevents any dynamic axiomatic to be as fancy as static risk measure if you want to get robustness in the picture. There is academic work on dynamic risk measure but they're not "usable" as they are stated right now as too far from pratical matter.
Oct
26
comment How to extrapolate implied volatility for out of the money options?
@Tal : Your question is legitimate and interesting IMO, if it is for Variance swaps and alikes products purposes, I think there is a stream about pricing bounds on those kind of products. Obloj et al., and Hobson et al. have written about this. But as I am not really well acquainted with those matters I really don't know what they are worth. Best Regards
Oct
25
comment How to extrapolate implied volatility for out of the money options?
Hi well I know P. Carr's reputation and there is no doubt that when he asserts such a claim he must have strong evidence for this to be right. I just wanted to say that some caution has to be kept in mind, by using a concrete example for which it is wrong to freeze BS Implied Volatilities for high strikes and very high strikes. Best regards.
Oct
24
comment What is the reason for the convexity adjustment when pricing a constant maturity swap (CMS)?
@Richard H : You got it right ;-)
Oct
20
comment How to calculate unsystematic risk?
You should specify a lot more details in your question. As it is I bet yuo get much answers. Regards
Sep
14
comment What are some examples of Compound Poisson processes in insurance?
@ user1379 : You should have a look at Kyprianou's Book " Introductory lectures on fluctuations of Lévy processes with applications". Regards
Sep
13
comment How useful is Markov chain Monte Carlo for quantitative finance?
@DavidShor: well in my field Bayes or not present price is the rule. For exemple if you know by Mcmc inference that volatility is mispriced for atm calls what can you do about it? You can hedge using you supposedly right estimate of vol but if the day after implied vol goes the wrong way then you will lose money and if you have finite stop loss then even if your estimate is right then you are loosing money. Is it more clear ?
Aug
11
comment How is mean reversion implied by different valuations of Bermudan swaptions?
ok we have the model, now what it is mean-reversion mathematically speaking ?
Aug
9
comment How is mean reversion implied by different valuations of Bermudan swaptions?
The question is so vague that it doesn't deserve an answer IMO. Define first mean reversion, the dynamics of your model and what vanillas you are using in your calibration portfolio.
Jun
21
comment How random are financial data series?
In the same vein : financial time series have an econometric Hurst index that are usually above 1/2, which means that long memory phenomenons can be suspected.
Jun
17
comment Fixed income modeling
@ FES : One thing is for sure, due to your first bullet point, if you want to take look at credit models you should focus on "structural pproach". Regards.
Apr
13
comment How do equivalent martingale measures arise in pricing?
Could you give more details about the probability laws of the "bonds" and "shares" that you are dealing with in your exercise ? Regards PS : Tagging "Homework" this question would be natural.