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by Costeanu
March 9th, 2011, 1:04 am
Forum: Numerical Methods Forum
Topic: Seed value for Random Number Generator
Replies: 11
Views: 23169

Seed value for Random Number Generator

<t>Hi karthikeqd,You should always use the same seed. Even better, you should use the same seed for all derivatives that you price. As an anecdote, at some point during the credit crunch, a friend of mine, working for a BB bank that will remain unnamed, was asked to run through a large number of see...
by Costeanu
February 28th, 2011, 5:09 pm
Forum: Book And Research Paper Forum
Topic: Simplified CMS Spread Option Pricing
Replies: 11
Views: 31580

Simplified CMS Spread Option Pricing

<t>Hi analyst77,When you price a single CMS option, you need to do a change of measure from an annuity measure to a forward measure. If you want to price a CMS spread option, you need to do two such changes of measure. Once you do that you will have one-dimensional distributions, and you need to cou...
by Costeanu
February 24th, 2011, 1:22 pm
Forum: Technical Forum
Topic: American forward american option
Replies: 17
Views: 23162

American forward american option

<t>Amin, my observation was quite trivial, it doesn't improve your solution in either running time or accuracy. Just in memory and probably a few lines of code. You can march backward calculating your several ATM american options, and do the interpolation and calculate the compound american option a...
by Costeanu
February 23rd, 2011, 8:30 pm
Forum: Technical Forum
Topic: American forward american option
Replies: 17
Views: 23162

American forward american option

And, if I may add, you can do this in one single backward sweep.
by Costeanu
February 10th, 2011, 7:03 pm
Forum: Technical Forum
Topic: compare two delta hedging strategy
Replies: 2
Views: 22192

compare two delta hedging strategy

<t>That's not really a problem, it's good that the mean is small compared to the standard deviation. It's how it's supposed to be. If for one strategy the mean is negative, you have "bleeding", so that strategy is clearly wrong. And if you have a positive mean, it's a bit of a question mark: what wi...
by Costeanu
February 4th, 2011, 7:04 pm
Forum: Student Forum
Topic: Hull-White and skew
Replies: 4
Views: 23981

Hull-White and skew

I suppose a binomial tree works. In general people use trinomial trees, or more advanced trees (willow and SALI). You can probably use Crank-Nicolson as well, or some other finite difference scheme.
by Costeanu
February 4th, 2011, 5:48 pm
Forum: Careers Forum
Topic: "we'll be in touch soon" ... what does that mean, really?
Replies: 20
Views: 28963

"we'll be in touch soon" ... what does that mean, really?

<t>They are not going to sue you, but you don't want to burn any bridges. If you accept a job in academia and then turn away, a number of people will be unhappy with you, and, what's worse, with your advisor. Later on, maybe years down the road, you may interview at some hedge fund and their HR will...
by Costeanu
February 4th, 2011, 5:31 pm
Forum: Student Forum
Topic: Hull-White and skew
Replies: 4
Views: 23981

Hull-White and skew

<t>Hi donal, Hull-White cannot match the skew. Generally for short-tenor swaptions the smile implied by Hull-White is closed to normal, and it tilts a bit for longer tenor, but you cannot manipulate it by playing with the model parameters. Well, technically you could for long-tenor swaptions, by pla...
by Costeanu
January 28th, 2011, 2:53 pm
Forum: Numerical Methods Forum
Topic: QMC in path dependent options
Replies: 3
Views: 22261

QMC in path dependent options

<t>Hi Mgale, If you want to simulate times t1<t2<...<t10 for example, you need a 10-dimensional QRN generator for a 1-factor model. For a 2-factor model you need a 20-dim QRN generator. If you have n factors and m timepoints you need n*m dimensions. This number can sometimes be big, for example in t...
by Costeanu
January 25th, 2011, 12:46 am
Forum: Numerical Methods Forum
Topic: the meshless method ?
Replies: 40
Views: 36032

the meshless method ?

<t>Hi sebgur, Thanks for sharing your experience. I hope you'll keep getting nice results as you try higher dimensions, and new option types. Please keep us posted. Regarding your remark that the RBF method should converge quickly due to its spectral nature, well, this spectral thing can be a blessi...
by Costeanu
January 22nd, 2011, 10:14 pm
Forum: Careers Forum
Topic: Doing research as a front office quant
Replies: 16
Views: 23122

Doing research as a front office quant

<t>In my case I would say roughly zero. My boss once told me that one thing I did would qualify as an MPU. MPU, for those in the know, means minimum publishing unit. I tend to think it's about 0.5 MPU's.I did some research on my own time though. I think as a FO quant research is really only a hobby....
by Costeanu
January 21st, 2011, 7:57 pm
Forum: Brainteaser Forum
Topic: Ice mountain
Replies: 7
Views: 25840

Ice mountain

Nice link. And it looks like the answer for the fixed size is indeed 30 degrees.For the gliding knot case, the problem is somewhat a physics problem.
by Costeanu
January 21st, 2011, 2:47 pm
Forum: Numerical Methods Forum
Topic: MC vs QMC
Replies: 13
Views: 23609

MC vs QMC

<t>Hi r00kie, If you want to calculate the error given by an MC integration, you run it several times with different seeds (and the same number of paths) and calculate the standard deviation. If it's higher than your tolerance, you increase the number of seeds. With QMC you don't have a seed. Howeve...
by Costeanu
January 20th, 2011, 2:51 pm
Forum: Numerical Methods Forum
Topic: the meshless method ?
Replies: 40
Views: 36032

the meshless method ?

<t>Hi Daniel,Memory problems translate into time problems. If you have a 100 billion nodes per time point, the scheme will be at least as slow as a Monte Carlo with a 100 billion paths. As for the ADE that I have played with, I did a straight implementation of Saulyev's scheme. I didn't know that th...
by Costeanu
January 19th, 2011, 3:00 pm
Forum: Numerical Methods Forum
Topic: the meshless method ?
Replies: 40
Views: 36032

the meshless method ?

<t>Daniel, I suppose your question is addressed to me. I don't have at hand my experiments with ADE, and besides, the topic of the discussion was the meshless method, not ADE. For what it's worth, I don't find any particular FD method in current use very exciting. CN with ADI works ok in 3D+time. Tr...
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