>Done in 1609, Kepler's fakery is one of the earliest known examples of the use of false data by a giant of modern science. So Kepler practised fake news. Disappointing. I'm willing to wager one Higgs boson that CERN's CMS results are irreproducible too. On another topic, I tend to shun away f...
Yes the Journal of Risk has an impact rating, but Risk magazine, the one I meant I believe doesn't. It would be silly that if something is called a "magazine" instead of a "journal" it is not included in impact ratings, but that may be the reason. It's hard to argue that SABR and...
Thanks Alan. I actually want to try the 3/2 model with mean reversion - as in your book volume I. At first I thought that I would need to recalculate the whole smile at each time step (which is a Monte Carlo in a Monte Carlo), find the new (adjusted) zero vanna IV and varstrike and then update the h...
Why isn't Wilmott included in impact factor rankings for quant finance journals? Neither is Risk. Not sure how these things work and how relevant rankings are.
Update: I derived a more accurate formula for the hedge ratio, and I will update the arXiv paper accordingly. See the formula below and also a histogram of the hedge p/l in volatility points. I.e. if final value of volatility swap is 20% and the hedge is 20.2%, then p/l is 0.2%. I ran 500 simulation...
I think actually the section on hedging needs revision because I overlooked something subtle (as usual). The end conclusion though that you need 1/(2[$] \Sigma_- [$]) of varswaps to hedge volswaps I believe remains true. The subtlety is as follows: given two functions [$] F(x) [$] (the volswap) and ...
@Cuch: couldn't help noticing the R. van Gulik quote. The Robert van Gulik who studied physics at Leiden Uni? If so, give him my regards if you speak to him again, although I don't think he remembers me. He knew his Feynman diagrams well, smart guy.
Yes, SABR with mean reversion is I think what you are suggesting. I will try that, thank you. Btw, I wasn't aware of this until only recently, but SABR with positive correlation results in loss of martingality. Not really an issue since I am mainly interested in equity, but could be an issue for FX....
" I think that the trading industry still relies *too much* on gut feeling and experience where people who graduated with a BA from arts or some business administration represent the highest share of the traders. " I don't think this is true (anymore). More and more traders are required to...
Thank you for taking the time to read it and for the comments, Alan. Much appreciated. Yes, although more cumbersome than Heston I should probably use lognormal or 3/2 model for the numerical part (not my forte, but needs to be done). If you or anyone else have suggestions on how best to carry out t...
In this working paper a nonparametric hedge ratio is derived for general stochastic volatility models. Enabling the hedging of volswaps with varswaps only.
Hi Alan, thanks for the question. First of all, also for anyone else reading this thread, I am not an expert on Malliavin calculus either. All technical questions on Malliavin is probably best answered by E. Alos - I believe her email is on the arXiv site. My very limited contribution to the paper i...
A paper by Elisa Alos, Kenichiro Shiraya and myself on the difference between the exact volatility swap price and the d2=0 approximation for stochastic volatility models driven by fractional noise. For practitioners the numerical results section could be interesting as it gives a sense of how the d2...
Thanks - yes maybe that could work. Preferably I could somehow relate the instrument, whatever it is, to a single vanilla option (by eg choosing an appropriate strike), but I am starting to believe that may be impossible.