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 Sep26 comment Difference between kappa and delta in mixed-effects model I am not sure if this has an exact application in finance, but the underlying stochastic modeling is also used in quant finance. Purposefully, I have asked the question based on concept than on application which could be many, including finance. Mar23 comment Can we explain physical similarities between Black Scholes PDE and the Mass Balance PDE (e.g. Advection-Diffusion equation)? Thanks for the elaborate explanation mepuzza! Mar22 comment Can we explain physical similarities between Black Scholes PDE and the Mass Balance PDE (e.g. Advection-Diffusion equation)? Can you try to elaborate your answer a bit more? Mar22 comment Can we explain physical similarities between Black Scholes PDE and the Mass Balance PDE (e.g. Advection-Diffusion equation)? Just accepted answers from all of my previous questions. Mar22 comment Can we explain physical similarities between Black Scholes PDE and the Mass Balance PDE (e.g. Advection-Diffusion equation)? Oh ok. I am sorry about that. Thanks for informing me about the general norm. Apr2 comment Few questions on Binomial-Lattice Option Valuation I think you are wrong in your first paragraph. Starting page 8, there's a good explanation about Binomial Lattice Option Valuation on this link slb.com/~/media/Files/resources/oilfield_review/ors03/win03/… Apr2 comment Few questions on Binomial-Lattice Option Valuation If the binomial lattice is giving me option PV's, and my PV's are supposed to decrease with time, then why does half of values in my terminal nodes show an increase in values than what I start with (=S0). I have attached a snapshot of the values in the question. Apr1 comment Risk neutral probability in binomial lattice option coming greater than 1…what's wrong? The first condition doesn't do any good either. Usually u~[1.001,1.5], and as I said in comment to quant_dev that by putting nColumn=1000, which gives del_T=0.02, then you can calculate that your given condition is satisfied, however the p is still greater than 1. Apr1 comment better estimator of volatility for small samples webs1.uidaho.edu/geoe428/files/GeostatSec7.pdf: You dont need to read all of it. Just get the idea of making a cut-off limit and using binary numbers 0 and 1 to populate your distribution. This way you can subdue the effect of outliers. Mar30 comment Risk neutral probability in binomial lattice option coming greater than 1…what's wrong? Here's the wikipedia article: en.wikipedia.org/wiki/Binomial_options_pricing_model Mar29 comment Risk neutral probability in binomial lattice option coming greater than 1…what's wrong? It doesn't. Even if I make nColumn=1000 and T=20, still p=4.1291. Feb8 comment Deterministic interpretation of stochastic differential equation @richardh: And moreover I never said he could solve SDE by discretizing it. I specifically gave him the link to show the final formula which is an implicit equation, and can only be solved by Finite Difference. Feb8 comment Deterministic interpretation of stochastic differential equation @richardh: I didn't presume that what he's showing is not correct. I gave my answer based on his equation. Moreover, what I said is a differential term with power 1/2 is indeed the same. That term comes from Wiener process' formula. I gave answer based on his equation. And to be fair, I doubt your answer's correctness in starting, however I don't have time to look up that and then downvote the answer with the courage of not giving reason. Once again, my answer was based on his equation and not on standard GBM equation. Feb8 comment Deterministic interpretation of stochastic differential equation Whoever downvoted, write comment for that. Feb8 comment What is the difference between volatility and variance? I think variance is called quadratic measure, or double moment, not volatility. Feb7 comment Solving Path Integral Problem in Quantitative Finance using Computer Not to disregard this question as unrelated, but I'd suggest that you could find answer on how to code this on stackoverflow.com. Just a suggestion. Feb7 comment Deterministic interpretation of stochastic differential equation @vonjd: Thanks! 1) There will not be a second derivative term. 2) See in this link: puc-rio.br/marco.ind/sim_stoc_proc.html#mc-mrd Feb6 comment Appropriate measure of Volatility for economic returns from an asset? @barrycarter: PV is the discounted cash flow. Can be discrete or exponential discounting. Nevertheless, PV will be a function of time in either case. I have tried using monte carlo simulation to find volatility (to be used in B-S equation), however I want to explore what could be other methods to find volatility. As to your question, yes volatility is a function of time here. Feb6 comment Appropriate measure of Volatility for economic returns from an asset? @Dimitris: What's your comment about? Feb6 comment Appropriate measure of Volatility for economic returns from an asset? @Shane: I didn't devise the term 'real'. If you search for it then you'll find that its a concept borrowed from quant finance for use in assets other than just stock and derivatives. Hence, the term real. Also, not all the concepts of finance can be used here because of the difference in fundamental premise and assumptions.