SERVING THE QUANTITATIVE FINANCE COMMUNITY

Search found 1737 matches

by DavidJN
March 24th, 2020, 10:33 pm
Forum: General Forum
Topic: List of Funds
Replies: 3
Views: 2115

Re: List of Funds

Seeing as correlations are typically computed using historical data (more on that in a moment), I wouldn't be inclined to bet the shop on any such numbers in the current environment as we're surely experiencing some kind of stochastic regime shift at present. Having said this, Markit's consensus pri...
by DavidJN
March 24th, 2020, 3:23 pm
Forum: Technical Forum
Topic: Modified Duration
Replies: 4
Views: 1483

Re: Modified Duration

When tackling the bond futures, make sure you understand the cheapest-to-deliver options.
by DavidJN
February 5th, 2020, 7:18 pm
Forum: Technical Forum
Topic: Hedging with a different underlying - bond options case
Replies: 3
Views: 1122

Re: Hedging with a different underlying - bond options case

If the underlying bonds do not trade at all it would be a challenge to find highly correlated tradeable bonds as hedge candidates because without trade how would you ascertain the correlation? Methinks more market specifics are required.
by DavidJN
January 29th, 2020, 8:59 pm
Forum: General Forum
Topic: Implied/Realised Volatility Ratio for Negative Rates?
Replies: 11
Views: 1674

Re: Implied/Realised Volatility Ratio for Negative Rates?

If one compares an apple to an orange there should be no surprise that they're not the same.  When talking about swaptions, one is naturally interested in the behaviour of forward-starting par rates corresponding to the swaptions in question. I think that is the point you are making. Given a complet...
by DavidJN
January 28th, 2020, 4:28 pm
Forum: General Forum
Topic: Implied/Realised Volatility Ratio for Negative Rates?
Replies: 11
Views: 1674

Re: Implied/Realised Volatility Ratio for Negative Rates?

“ As you approach the maturity of a swaption, the points of the yield curve that forms the swap rate  are not fixed.  Those points start sliding toward time=0.”   How is aging of bespoke swaps relevant when one is dealing with the implied vols of ATM par swap rates that are quoted as a constant matu...
by DavidJN
January 22nd, 2020, 8:17 pm
Forum: Student Forum
Topic: Dimensionality of Monte Carlo
Replies: 14
Views: 1434

Re: Dimensionality of Monte Carlo

Thanks for looking at this. My thinking too was to equate dimensionality with the number of state variables.

Having said this, might path dependency complicate things? Prepayments, knock-ins/outs and the like?

I was thinking of dt as constant, sorry if not clear. 
by DavidJN
January 21st, 2020, 7:45 pm
Forum: Student Forum
Topic: Dimensionality of Monte Carlo
Replies: 14
Views: 1434

Dimensionality of Monte Carlo

I am unclear on the concept of dimensionality when it comes to using Monte Carlo for option valuation and what I am reading has unfortunately not made things any clearer.   Starting as simply as possible, simulating the terminal price at option maturity of a single underlying in one time step jump f...
by DavidJN
November 7th, 2019, 5:50 pm
Forum: General Forum
Topic: Volatility of B from correlation with another asset A
Replies: 3
Views: 1628

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: 1934

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: 3105

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: 3105

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: 3607

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: 2680

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: 4
Views: 3470

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.
GZIP: On