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visits member for 3 years, 4 months
seen Sep 6 at 1:32

Probability, finance and due diligence - @EllieAsksWhy


Feb
5
comment Why are GARCH models used to forecast volatility if residuals are often correlated?
GARCH models worked quite nicely for me. Just an ad hoc comment. They weren't terribly complicated or difficult to work with, and as I recall, weren't supposed to be afflicted with auto-correlated residuals! +1 to you...
Jan
27
revised Value-at-Risk of the sum of two dependent lognormal random variables
Improved formatting of link, corrected spelling error, tried to edit for clarity.
Jan
27
suggested suggested edit on Value-at-Risk of the sum of two dependent lognormal random variables
Jan
22
comment How to use macroeconomic indicators for long/short trading strategies?
Wow, you're right. That was an amazing answer from @Quant Guy!
Jan
8
revised Can you fully hedge an option in the presence of counterparty risk?
Removed personal information, corrected grammar error, tried to improve clarity
Jan
8
comment Can you fully hedge an option in the presence of counterparty risk?
@klon Yes, that is what we did at NSCC! I referred to it as a short-term collateral tithe, which sounds odd. It is just as you described, daily collateralization, based on the historical volatility over the time until settlement, T+3 for equities, T+1 for gov't securities etc. The ISDA Master Agreement is an excellent suggestion and is used for (many but not all) OTC derivatives.
Jan
8
awarded  Commentator
Jan
8
comment Can you fully hedge an option in the presence of counterparty risk?
I answered the question that you asked. Then four hours later you edited the question, adding some very specific details. If I can, I'll respond to the edits, but will do so as a separate answer. I'm not complaining, okay? It is allowed to give two answers to the same question on StackExchange sites.
Jan
7
comment Mersenne twister random number generator in Java for Monte Carlo Sim.
@quant_dev I smiled when I read: This is not cryptography. You're right!
Jan
7
revised Can you fully hedge an option in the presence of counterparty risk?
edited tags
Jan
7
answered Can you fully hedge an option in the presence of counterparty risk?
Dec
15
comment Are there any new Option pricing models?
That URL has a pay wall unfortunately. That's my problem, I think, not yours, and I appreciate your answer. You gave additional content so I have a starting point. Might you have any other links that are more accessible?
Nov
25
comment How reliable is Benford's Law in forecasting crises?
Oh, one more thing. I wasn't able to access that second URL you posted, which I've been eager to read for quite awhile (Handelsblatt journalist Olaf Storbeck wrote about it too). Any suggestions about that? (Your first URL was cross-published in the FT by the way, and it was quite a fine article).
Nov
25
comment How reliable is Benford's Law in forecasting crises?
I appreciated the econerdfood post. What a good econ blog (written by an assistant professor, so I shouldn't be that surprised). Make sure to read her follow-up article, econerdfood.blogspot.com/2011/10/… posted after you wrote this. Her findings were less conclusive in some ways, and more in other ways in the follow-up.
Oct
21
comment How to calculate unsystematic risk?
You mean the calculation of beta in the Capital Asset Pricing Model, no? As @Quant Guy mentioned, I was also puzzled by the "CAPM formula" in the question.
Oct
21
comment Why write options on a volatility target index?
Excellent answer. Perfectly explains why some would do this, even if they are "paying through the nose" so to speak. EDIT: That is a very old expression, nothing to do with any illegal activities. Just occurred to me!
Oct
20
awarded  Critic
Sep
22
comment How to update an exponential moving average with missing values?
Yes, the second option actually works well. It is practical and less prone to error because there isn't excess computation required. I presume there isn't lots of missing data. There shouldn't be if the data frequency is generally available at 1-second intervals.
Sep
22
revised How to update an exponential moving average with missing values?
edited tags
Sep
22
revised How are distributions for tail risk measures estimated in practice?
edited tags