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seen Jul 16 at 22:48

Sep
26
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.
Mar
23
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!
Mar
22
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?
Mar
22
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.
Mar
22
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.
Apr
2
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/…
Apr
2
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.
Apr
1
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.
Apr
1
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.
Apr
1
comment better estimator of volatility for small samples
I am speaking from perspective in my application of reservoir engineering modeling. I am also aware of its usability and popularity from taking a course on Stochastic Modeling. Moreoever, I was comparing indicator transform with rank transform. Nevertheless, if you want a solution to your problem you might want to explore what a sequential indicator transform does.
Mar
30
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
Mar
29
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.
Feb
8
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.
Feb
8
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.
Feb
8
comment Deterministic interpretation of stochastic differential equation
Whoever downvoted, write comment for that.
Feb
8
comment What's the difference between volatility and variance?
I think variance is called quadratic measure, or double moment, not volatility.
Feb
7
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.
Feb
7
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
Feb
6
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.
Feb
6
comment Appropriate measure of Volatility for economic returns from an asset?
@Dimitris: What's your comment about?