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by DavidJN
November 7th, 2019, 5:50 pm
Forum: General Forum
Topic: Volatility of B from correlation with another asset A
Replies: 3
Views: 398

Re: Volatility of B from correlation with another asset A

A concrete example of your problem faced frequently by middle offices would be the following - you have two traded assets so they both have a historical price and return history. One asset has liquid options traded on it but the other has none. Your front office wants to trade an option on the asset...
by DavidJN
November 7th, 2019, 5:37 pm
Forum: Technical Forum
Topic: Margin calculation when collateral is in different currency
Replies: 2
Views: 680

Re: Margin calculation when collateral is in different currency

Think of it as a cheapest to deliver option.
by DavidJN
November 5th, 2019, 11:47 pm
Forum: Book And Research Paper Forum
Topic: New paper -- Option-based Equity Risk Premiums
Replies: 6
Views: 1172

Re: New paper -- Option-based Equity Risk Premiums

Alan, my work was a failed attempt at a PhD thesis at what I consider to be a then narrow minded and unprofessional department in one of Canada's universities. I had bought data from the CBOE and had positive empirical results. Anyway, rather than continue trying to reason with a brick wall, I just ...
by DavidJN
November 1st, 2019, 1:23 pm
Forum: Book And Research Paper Forum
Topic: New paper -- Option-based Equity Risk Premiums
Replies: 6
Views: 1172

Re: New paper -- Option-based Equity Risk Premiums

I've only just downloaded your paper, so these are only my first thoughts. In a similar vein to Ross Recovery, you are imposing structure on utility to frame the  model. Why no mention of Ross? Or Peter Carr?  In the late 1980's I took a rather different and arguably more direct approach that impose...
by DavidJN
October 30th, 2019, 11:39 pm
Forum: General Forum
Topic: XVA; X = cost of busted limits + PL predict failure
Replies: 2
Views: 1407

Re: XVA; X = cost of busted limits + PL predict failure

Collateral exchange and central clearing are fairly effective modern mechanisms designed to reduce losses due to the failure of a counterparty. It is interesting that you did not mention them.   If your failed counterparty provided a hedge you will have to replace it with another trade from another ...
by DavidJN
October 15th, 2019, 2:18 pm
Forum: General Forum
Topic: money creation
Replies: 2
Views: 1333

Re: money creation

I will read your reference, but before I do I will just note a couple of things. I share your skepticism about the received wisdom that banking activities increase the money supply With one exception, when they extend credit, banks lend out other people's money - either borrowed money (deposits, deb...
by DavidJN
October 10th, 2019, 11:06 pm
Forum: Numerical Methods Forum
Topic: Filling gaps in correlated bivariate data
Replies: 3
Views: 1460

Re: Filling gaps in correlated bivariate data

SAS has functionality for this kind of stuff. E&Y has been applying it to fill in historical time series for FRTB clients.
by DavidJN
October 10th, 2019, 11:04 pm
Forum: Numerical Methods Forum
Topic: Filling gaps in correlated bivariate data
Replies: 3
Views: 1460

Re: Filling gaps in correlated bivariate data

There's a lot of real estate to fill in there. Might the correlated Brownian bridge technique be useful?
by DavidJN
October 3rd, 2019, 1:36 pm
Forum: General Forum
Topic: Inner Circle
Replies: 6
Views: 2230

Re: Inner Circle

Recalling the process of signing up, wasn't the idea behind it the same idea as with all forms of social media -  to learn things about you that can be somehow exploited for money? 
by DavidJN
September 20th, 2019, 4:06 pm
Forum: Trading Forum
Topic: Early Exercise Risk Management for American Option
Replies: 9
Views: 1915

Re: Early Exercise Risk Management for American Option

Unless there is no liquidity, in which case much of theory becomes less useful, the suggestion that a market maker can only delta hedge is unrealistic. I say that as a former option trader in a number of underlyings (fixed income, equity, FX). Simulation is a good framework to investigate your own a...
by DavidJN
September 4th, 2019, 1:52 pm
Forum: Student Forum
Topic: Interview Question
Replies: 2
Views: 3952

Re: Interview Question

I’ve seen this question before and thought it insufficiently phrased. Apart from not knowing the investment purpose and the investment horizon (a pension plan might logically operate differently than a bank trading desk), what is the regulatory capital treatment of the asker? The question is likely ...
by DavidJN
September 2nd, 2019, 12:49 pm
Forum: General Forum
Topic: Does Macro Variables help in predicting Market Retrun?
Replies: 6
Views: 2872

Re: Does Macro Variables help in predicting Market Retrun?

The financial sector is typically simplistically represented in DSGE (distributed stochastic general equilibrium) macroeconomic models, sometimes as simple as plug variables that assumes perfect competition and deny the possibility of a financially induced recession. Macroeconomics as   a discipline...
by DavidJN
August 27th, 2019, 10:22 pm
Forum: Off Topic
Topic: Is Ayn Rand God?
Replies: 119
Views: 42912

Re: Is Ayn Rand God?

Wasn't Alan Greenspan one of her many lovers? Yuck!
by DavidJN
August 27th, 2019, 10:19 pm
Forum: Student Forum
Topic: PnL for dividends and REPO
Replies: 2
Views: 17893

Re: PnL for dividends and REPO

What do you mean by a "PnL formula for dividends"?  A rate of return over an arbitrary holding period consists of two parts - any cash income received (e.g. dividend), plus the capital gain or loss.
by DavidJN
August 23rd, 2019, 4:24 pm
Forum: Economics Forum
Topic: Is economics a science?
Replies: 14
Views: 2966

Re: Is economics a science?

 ‘A science’ containing contradictions is not a science, but an intellectual mess.

Has mathematics resolved the incompleteness theorems (e.g. Godel)? That is a question rather than a statement.
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