athos
  • Member for 9 years, 10 months
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Why Ito calculus?
11 votes

My understanding is because the Ito's integration definition keeps the martingale property. With Brownian motion $W(t, \omega)$ defined, to define stochastic integration in a Riemann–Stieltjes style:...

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Baye's rule for conditional expectations (Proof review)
Accepted answer
7 votes

Is this the proof you are looking for? -- from Shreve, S. E.'s book "Stochastic calculus for finance II, continuous-time Models", chapter 5.

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how to derive yield curve from interest rate swap?
4 votes

thanks for all answers above. William's answer is more direct. actually i was quite new to the calibration area one year ago, so my question is quite simple but that simplicity might mislead others ...

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which product supports Basel III LCR (liquidity coverage ratio) reporting?
3 votes

So far I only know that SunGard has a product named "Ambit Focus", where its module "Liquidity Risk" supports the LCR and NSFR reports according to Basel III liquidity rules.

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Is Unexpected Loss ever used in Basel II?
Accepted answer
3 votes

let me try answer my own questions, partially, from below that are exerpted from FRM exam notes. So actually the K above, is UL, though it derives only from PD and maturity, but the G, N and 0.999, ...

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Why would there be a positive risk-free rate?
2 votes

In my opinion, risk free rate is not necessarily positive and not so important to pricing theory. It happened to be positive in most cases, but imagine a planet using Uranium-235 instead of gold as ...

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American Swaption Pricing with Monte-Carlo method
2 votes

American options pricing (swaption is just a kind of option) is a bit tricky due to the early exercise. Here is a page listing possible approaches, including some numeric methods, and some close form ...

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Self-financing and Black-Scholes-Merton formula
Accepted answer
1 votes

OK, I think now I got the point, after comparing to Shreve's "Stochastic calculus for finance I, The binomial asset pricing model", the simpler case. The pricing theory in continuous time is: Defi ...

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backtesting a 5% quantile model of a discrete value random variable?
Accepted answer
1 votes

Just to answer my own question. Discrete variates' quantile, could be modelled and tested. I followed this paper: "Discrete Quantile Estimation", Halina Frydman and Gary Simon, New York University, ...

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Version of Girsanov theorem with changing volatility
0 votes

Pls check Shreve‘s Theorem 9.2.2 Change of risk-neutral measure . Is this what you are looking for?

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Is stock price priced in the uncertainty?
0 votes

I think I got the quantitative explanation in Steven E. Shreve's "Stochastic calculus for finance II":

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how to extend lognormal model so that $\sigma$ is correlated to $\mu$?
0 votes

to answer my own question, there's no popular model for the question, that $dS/S=\mu(t)dt+\sigma(t)dW$, and $\sigma(t)$ is correlated with $\mu(t)$. the general framework should be stochastic ...

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What are the CMG-relevant banks according to Basel III?
Accepted answer
0 votes

I think CMG means "Crisis Management Groups"

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