# Tag Info

Accepted

### Why dynamics of local volatility is wrong?

A general model (with continuous paths) can be written $$\frac{dS_t}{S_t} = r_t dt + \sigma_t dW_t^S$$ where the short rate $r_t$ and spot volatility $\sigma_t$ are stochastic processes. In the ...
• 3,836

### Why dynamics of local volatility is wrong?

Here "dynamics" means the assumed future behaviour of the spot process, namely that it follows the SDE $$dS/S = r dt + \sigma_{loc}(S,t) dW_t .$$ There are various ways to see that these dynamics ...
• 1,865
Accepted

### Do you have a good application example of Approximate Dynamic Programming?

I totally missed the coining of the term "Approximate Dynamic Programming" as did some others. Also, in my thesis I focused on specific issues (return predictability and mean variance optimality) so ...
• 7,702
Accepted

### Dynamics of LIBOR foward rate under T-forward measure

We assume that, under the risk-neutral measure $Q$, \begin{align*} dP(t, T) = P(t, T)(r_t + \sigma(t, T)dW_t), \end{align*} where $\{W_t, \, t \ge 0\}$ is a standard Brownian motion. Then \begin{align*...
• 20.5k

### Non-linear Dynamical Systems and Quantitave Finance

This book might be what you are looking for: Theory of Financial Risk and Derivative Pricing. From Statistical Physics to Risk Management by J.-P. Bouchaud and M. Potters As one reviewer from amazon ...
• 27k

### Are there stocks dynamic that cannot be represented by Generalized Black Scholes model?

KeSchn and I pointed out in the comments that this it is not possible to represent all stock dynamics using the Generalized Black Scholes model. For example, there can be jumps at random moments and ...
• 7,702

• 1,638
1 vote
Accepted

### How to estimate an Engle's asymmetric DCC model in R?

The "rmgarch" package in R requires specifying univariate GARCH models before a DCC (or asymmetric DCC, aDCC) can be fitted. The workaround is to specify models that essentially "do nothing", e.g. a ...
• 1,788
1 vote
Accepted

### Simulate from time-dependent copula in MatLab using COPULARND

You can use a for-loop on your correlation series. for i=1:2000 simulation=copularnd('t',rho(i),NU,N));
• 5,649

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