# Questions tagged [models]

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### Cheyette Model vs Markov Functional Model

Just like to understand more about the model difference between 1d-Cheyette Model vs 1d-Markov Functional Model. Is there a model difference betweeen these 2?
52 views

### Simple short rate model that generates ZCB skew

Which is the simplest short rate model that generates ZCB vol skew ? I want to use it afterwards and do simple "on paper" qualitative development about its dynamic(I don't need a model I can ...
22 views

### Estimating expectation from a Markov chain process with AR(1) framework and stochastic volatility

I have a stochastic volatility model of a commodity price as follows: ...
115 views

### What is wrong with my HAR model - constantly increasing?

I am trying to code the HAR (and eventually the HARQ) from Bollerslev et al 2016 and Corsi 2009. $$RV_t = \beta_0 +\beta_1 RV^d_{t-1} + \beta_2 RV^W_{t-1}+\beta_3 RV^M_{t-1}+u_t$$ Bollerslev ...
69 views

### Derive the Probability of Default (PD) of private companies with Merton Model

Do you know a well used method how to calculate the PD of private companies using the Merton Model. The main challenges I am facing is to get the appropriate volatility of the assets and the drift. ...
1 vote
96 views

### Identify upcoming stock price gaps in Implied Volatiltiy (quant / standardized approach)?

What you often obeserve in implied volatiltiy are higher levels of implied volatility for upcoming events like earnings or presentation of pharma data. For a human being which collects manual the ...
97 views

### Validity of Bermudan Swaption's Price/Greeks

I'm implementing a lot of stochastic models on my own for fun and I'm quite puzzled about the usual procedure concerning the correctnes of Bermudan swaptions prices and greeks ? How can you tell that ...
80 views

Consider a payoff that pays a certain amount N of a vanilla Call (underlying: S, Maturity= T, strike:K). Every semester date Ts before T, if S>K(Ts), then N is increased by 1. This product seems ...
113 views

1 vote
164 views

### Loan level model to understand drivers of mortgage prepayments

I am following up from my question here. As described there, I'm trying to assess the drivers of CPRs for a type of MBS. However, I want to understand, how a loan-level model of such a relationship ...
1 vote
100 views

### How to set up data for understanding drivers of prepayments

I would like to understand the drivers of prepayment of a certain sector of MBS. I have some explanatory variables that I think would explain the actual CPR's and want to model the prepayments through ...
121 views

### Is there a framework to study quantitative model robustness/uncertainty?

Can you point me to any resources about a possible framework to analyse and possibly quantify model uncertainty and -robustness associated with quantitative investment models? As an example, there ...
214 views

### Linear programming optimization problems in finance

I'd like to know what are, if any, the applications of linear/non linear programming optimization techniques for financial markets. I'm a business major, and I want to find an argument for my thesis ...
600 views

### Interpretation of parameters in the CGMY model

I would like to understand role of parameters $C,G,M,Y$ in CGMY model, especially $G$ and $M$. The Lévy measure is $$\nu(x)=C\frac{e^{-Mx}}{x^{1+Y}}1_{x>0}+C\frac{e^{-G|x|}}{|x|^{1+Y}}1_{x<0}$$...
117 views

### Inter-temporal structural stability of stock markets

For my bachelor thesis I am trying to determine structural stability of some stock market in the following way: Identify an ARMA model for the whole sample Split the sample in two parts, and estimate ...
637 views

### What does it mean that model can reflect the ”volatility smile”

I know that implied volatility is the value for which the Black Scholes model returns the correct option price. I also know that if we plot the volatility on the strike price chart, we will see "...
86 views

### I just got Matlab, what are some options that I should model in a jump diffusion

Don't worry I understand mathematics: ito's calc, martingales, etc. I am just curious what options I should test, and from what indices. Is there stuff I can test from the 2008 crash to measure their ...