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by trc
February 22nd, 2023, 2:49 pm
Forum: Technical Forum
Topic: Is the type of mathematics found in finance limited?
Replies: 107
Views: 54407

Re: Is the type of mathematics found in finance limited?

Think about it this way: ever since LCTM there is a lingering suspicion that something might go wrong regardless of your academic and scientific credentials. Clients therefore seek reassurance that all is well with your modelling and one way of doing this is to make sure that your model is "ind...
by trc
February 22nd, 2023, 9:35 am
Forum: Technical Forum
Topic: Methods of yield to maturity calculation
Replies: 0
Views: 9317

Methods of yield to maturity calculation

There seem to be several methods to calculate the yield to maturity of a bond but it is difficult (and I failed to) find the definition of these standards. Let's review the situation: once the size and timing of the bond cashflows are fixed (via bond base data, holiday calendar, business day convent...
by trc
June 27th, 2006, 2:41 pm
Forum: Technical Forum
Topic: E[X_t|Y_t]
Replies: 4
Views: 101566

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: 101566

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: 196202

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: 192529

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: 191033

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: 190763

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: 196196

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: 190130

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: 196196

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: 193916

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: 193916

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: 196196

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: 197124

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 ...