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by DavidJN
August 15th, 2022, 3:19 am
Forum: Off Topic
Topic: Chatroom
Replies: 563
Views: 50915

Re: Chatroom

If memory serves me right, he was applying a pretty standard discounted expected cash flow argument to Samuelson’s lognormal stock price model to find the present value of the option. That gives you the right general shape of the resulting valuation formula, but with a risk adjusted discount rate t...
by DavidJN
July 31st, 2022, 6:50 pm
Forum: General Forum
Topic: VAT
Replies: 27
Views: 10441

Re: VAT

The VAT in essence works as follows. Someone digs a hole and walks away. Someone else comes, fills in the hole, then digs a bigger hole and walks away, and so on. The hole gets a little larger every time. The billions of debits and credits and thus generated daily are the accountant’s and the bureau...
by DavidJN
July 3rd, 2022, 2:51 pm
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 71
Views: 26805

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

Speaking of numeraires and the growth optimal portfolio, you will definitely profit from reading "The numeraire portfolio" by John B. Long Jr., Journal of Financial Economics, July 1990. Directly relevant to the topic at hand, an easier and more intuitive read than Harrison or Pliska, and ...
by DavidJN
June 29th, 2022, 3:14 pm
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 71
Views: 26805

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

Similar issues expressed here were identified examined in appreciable detail decades ago. Get thee a copy of the 1979 JET article " Martingales and arbitrage in multiperiod securities markets"  by Harrison and Kreps Fun reading. Pliska wrote pretty dense stuff about this as well. A useful ...
by DavidJN
June 25th, 2022, 2:10 pm
Forum: Book And Research Paper Forum
Topic: Cracking the Finance Quant Interview
Replies: 13
Views: 12964

Re: Cracking the Finance Quant Interview

Do you know what “do not trade” lists in the business are? Well, grasshopper, there are do not hire lists in the businesses as well. And guess how do not hire lists are created and maintained these days? One thing they look at is social media activity. You have just told everyone in the business you...
by DavidJN
May 4th, 2022, 4:23 pm
Forum: General Forum
Topic: Bond PnL
Replies: 5
Views: 3087

Re: Bond PnL

This issue has its origins in now outdated settlement practices, particularly the surely unnecessary 2-day LIBOR settlement lag. Swaps in more enlightened currencies (GBP, CAD, etc.) have no floating rate settlement lag because there is no reason to have one, at least not anymore.   I too argued wit...
by DavidJN
April 29th, 2022, 7:18 pm
Forum: Politics Forum
Topic: Tax the Rich!
Replies: 12
Views: 4972

Re: Tax the Rich!

Tax the Rich? Lemmy says Eat the Rich!
https://www.youtube.com/watch?v=Wh3t49NsWBA
by DavidJN
March 14th, 2022, 11:25 pm
Forum: General Forum
Topic: Repo P&L
Replies: 3
Views: 2414

Re: Repo P&L

There are two possible sources of error: marking the GBP repo incorrectly and getting the FX wrong. First thing I’d do is book some pure GBP/USD FX test trades into your two systems & see if the P&L agrees. If they don’t you may have found the source of your problem. To help narrow down the ...
by DavidJN
February 21st, 2022, 2:42 pm
Forum: Politics Forum
Topic: The vaccines
Replies: 398
Views: 69117

Re: The vaccines

Many commenters are understandably ignorant of a significant back story behind the Canadian trucker convoy controversy.   Of course there is an existing body of laws spread over the various government levels – municipal, provincial and federal - to deal with such unlawful behavior. But a form of par...
by DavidJN
February 17th, 2022, 7:27 pm
Forum: Politics Forum
Topic: The vaccines
Replies: 398
Views: 69117

Re: The vaccines

The last time Canada declared emergency federal powers there were bombings, kidnappings and the murder of a foreign diplomat. The bar should be set very high.   Half the trucker convoy money collected using web fundraising has come from outside the country. The Canadian public safety Minister has sa...
by DavidJN
February 15th, 2022, 10:39 pm
Forum: General Forum
Topic: To "convert" in EUR a USD Sovereing curve (?)
Replies: 6
Views: 3591

Re: To "convert" in EUR a USD Sovereing curve (?)

What do you mean by “ trying to convert the USD Sovereign curve into a EUR one”? Both are already readily observable.   There are four interrelated things here: spot FX, the two country yield curves and the term structure of fx forward rates. Give any three of these you can derive the fourth. Is tha...
by DavidJN
February 12th, 2022, 3:38 pm
Forum: General Forum
Topic: Implied volatility surface of an average rate Asian caps
Replies: 2
Views: 2530

Re: Implied volatility surface of an average rate Asian caps

Of course also I meant to say that the liquid vol quotes would be fitted to some kind of no-arbitrage vol surface model (e,g, SVI) before being used to price exotics.  
by DavidJN
February 12th, 2022, 3:35 pm
Forum: Politics Forum
Topic: The vaccines
Replies: 398
Views: 69117

Re: The vaccines

The Canadian truck convoy protestors are a motley collection of just what one would expect to be involved in such a protest - racists, science-deniers, gun nuts, misogynists, all spectacularly misinformed f**k-wits. It is already known that foreign money has flowed in from very dangerous players in ...
by DavidJN
February 8th, 2022, 4:03 pm
Forum: General Forum
Topic: Implied volatility surface of an average rate Asian caps
Replies: 2
Views: 2530

Re: Implied volatility surface of an average rate Asian caps

I’ll weigh in by stating the obvious - the volatility of the underlying should have nothing to do with the type of option being traded, the option model handles that part. I am of course assuming that the vanilla and average option models are logically consistent in the modeling sense (i.e. same ass...
by DavidJN
December 4th, 2021, 5:57 pm
Forum: Off Topic
Topic: Advent Calendar 2021 (for the OT)
Replies: 102
Views: 9576

Re: Advent Calendar 2021 (for the OT)

Arbitrage Pricing Theory?