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by trc
June 27th, 2006, 2:41 pm
Forum: Technical Forum
Topic: E[X_t|Y_t]
Replies: 4
Views: 101071

E[X_t|Y_t]

Tanks for all replies.
by trc
June 23rd, 2006, 12:59 pm
Forum: Technical Forum
Topic: E[X_t|Y_t]
Replies: 4
Views: 101071

E[X_t|Y_t]

<t>Assume you have a two dimensional diffusion processd(X_t,Y_t)=b(t,X_t,Y_t)dt+A(t,X_t,Y_t)dW_tis there an elegant way to compute the functionH(t,y)=E[X_t | Y_t=y]?I'll accept a two dimensional differential equation but not a three dimensional one.The problem comes up through Dupire's equation wher...
by trc
September 28th, 2003, 8:28 am
Forum: Numerical Methods Forum
Topic: Monte Carlo for American Options
Replies: 15
Views: 195368

Monte Carlo for American Options

<t>The basic premise of this paper is that the exercise boundary has the form S=F(B), where S is one of the state variables and B the remainingstate variables.Even if the exercise bounday has this form the choice of S is usually not abritray and how does one know which S to chose.In the main example...
by trc
September 28th, 2003, 6:20 am
Forum: Technical Forum
Topic: Hedging an option with a correlated asset
Replies: 28
Views: 191138

Hedging an option with a correlated asset

<r>Lets denote the option payoff by H and the assets by S and X respectively and assume the option expires at time T.I am assuming that you mean the payoff H=h(S) is a function of the entire path t->S(t) since obviously path dependent option payoffs are not deterministic functions of the asset price...
by trc
September 28th, 2003, 1:22 am
Forum: General Forum
Topic: Which models are used for market risk management in big Banks?
Replies: 5
Views: 190405

Which models are used for market risk management in big Banks?

<r>There are better ways than the bumping method of Greek computation.Check out the paper "Hedging with Monte Carlo" by Cvitanic et al.:<URL url="http://math.usc.edu/~cvitanic/papers.htmland">http://math.usc.edu/~cvitanic/papers.htmland</URL> also my book at <URL url="http://martingale.berlios.de">h...
by trc
September 25th, 2003, 10:49 am
Forum: Technical Forum
Topic: dual methods for american options
Replies: 6
Views: 190179

dual methods for american options

<t>mbacke,For the Haugh-Kogan approach (Theorem 4.6.2, p106 in the book on my website) you have to estimate the constant K and that will involve the computation of many conditional expectations E_t(U_{t+1}-U_t) along a large number of paths over which you have to average. It's a massive computation....
by trc
September 24th, 2003, 2:22 pm
Forum: Technical Forum
Topic: Implementation of BGM/Libor market model
Replies: 21
Views: 194812

Implementation of BGM/Libor market model

<r>Ladies and Gentlemen,Please obtain the first release of my C++ libor package (libor-0.4) from <URL url="http://martingale.berlios.de.The">http://martingale.berlios.de.The</URL> problems with the predictor-corrector algorithm disappeared after some seeminglyunrelated code rewrites. I no longer hav...
by trc
August 8th, 2003, 2:17 am
Forum: Programming and Software Forum
Topic: Fortran
Replies: 6
Views: 189621

Fortran

I am wondering to what extent Fortran is being used by quants.It does produce very fast code and it does have some object oriented capabilities.For standalone programs that provide taylored solutions to specific problemsit would seem to be a good choice.
by trc
July 6th, 2003, 3:18 am
Forum: Technical Forum
Topic: Implementation of BGM/Libor market model
Replies: 21
Views: 194812

Implementation of BGM/Libor market model

<t>The method which evolves n state variables from only two of them using the correlation matricesas described in the old attachment seems to be unsound. Consequently I am unable to implement a tree for the Libor market model with time varying volatilities.This is a big disappointment. The good news...
by trc
June 18th, 2003, 10:30 pm
Forum: General Forum
Topic: Strange kind of philanthropy
Replies: 38
Views: 191937

Strange kind of philanthropy

<t>The main difference I see between academe and industry is the secrecey and lack of peer review in industry whereas peer review and open communication of results is the corner stone of science. It ensures that mistakes are found and everything is sound.The secrecy spawns the amusing fact that ever...
by trc
June 16th, 2003, 2:46 pm
Forum: General Forum
Topic: Strange kind of philanthropy
Replies: 38
Views: 191937

Strange kind of philanthropy

<t>MobPsycho,The Libor market model is not just another interest rate model -- it is THE interest rate model and in fact much more thanmerely a model.The significance is that the model is derived from a fundamental principle (no arbitrage) which enforcesthe dynamics of the process of forward Libors ...
by trc
June 15th, 2003, 2:02 pm
Forum: Technical Forum
Topic: Implementation of BGM/Libor market model
Replies: 21
Views: 194812

Implementation of BGM/Libor market model

The Berlios servers are terminally ill.I am attaching an updated version of the FastLibor paper containing what I hope tobe a viable method of constructing a tree for the LMM.
by trc
June 14th, 2003, 11:02 pm
Forum: Book And Research Paper Forum
Topic: Free book
Replies: 14
Views: 196221

Free book

<r>Please be more specific.I have compressed the file to make it smaller.What are you suggesting?How could we do better than download the file using FTP?The Berlios servers are having trouble now.I don't know what the issue is.Maybe they are doing maintainance on the weekendIf this does not improve ...
by trc
June 14th, 2003, 2:30 pm
Forum: General Forum
Topic: Strange kind of philanthropy
Replies: 38
Views: 191937

Strange kind of philanthropy

<t>Gatarek,I want to thank you for the Libor market model because it is so beautiful.I believe that your desire for control of its use is ill advised.Instead it is gratifying to see that its use is spreading.Obviously your competitors like it too and so will the users.You will be remembered for the ...
by trc
June 14th, 2003, 12:30 pm
Forum: Book And Research Paper Forum
Topic: Free book
Replies: 14
Views: 196221

Free book

OK,I'll check it out.Presently I cannot get on the Berlios server.Maybe they are doing some maintainance.
GZIP: On