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by Paul
January 23rd, 2011, 6:57 pm
Forum: Brainteaser Forum
Topic: Wiener is a positive guy
Replies: 41
Views: 29294

Wiener is a positive guy

It's surprisingly easy. The double integral can be evaluated explicitly.P
by Paul
January 23rd, 2011, 6:48 pm
Forum: Brainteaser Forum
Topic: Wiener is a positive guy
Replies: 41
Views: 29294

Wiener is a positive guy

Correct. It's very important to do a few sanity checks early on in any problem. Looking at small and large values of parameters is a very common one, it should be second nature.P
by Paul
January 23rd, 2011, 6:36 pm
Forum: Brainteaser Forum
Topic: Wiener is a positive guy
Replies: 41
Views: 29294

Wiener is a positive guy

Another hint: (t2-t1) small vs t2>>t1.P
by Paul
January 23rd, 2011, 6:17 pm
Forum: Brainteaser Forum
Topic: Wiener is a positive guy
Replies: 41
Views: 29294

Wiener is a positive guy

Are you assuming some symmetry in your 'quadrant' solution that is not really there? Can the answer really be independent of t1 and t2?P
by Paul
January 19th, 2011, 10:40 am
Forum: Off Topic
Topic: Lethargy or a fading away ?
Replies: 44
Views: 23572

Lethargy or a fading away ?

It's just a seasonal lull. Happens every xmas and new year! All stats are up on a year ago. But DA's been around here for a long time, if anyone has any insight into this 'optical illusion' (if it exists) it will be him.P
by Paul
December 30th, 2010, 7:53 pm
Forum: General Forum
Topic: Bumpy Bootstrap Values
Replies: 5
Views: 23194

Bumpy Bootstrap Values

<t>It's because it's an 'inverse problem' mathematically speaking. Yields are averages of forward rates and averaging is a smoothing operation. Going the other way, from yields to forwards, is whatever you'd call the opposite of smoothing. Roughening? You can smooth things out, by using certain inte...
by Paul
December 29th, 2010, 9:06 pm
Forum: Book And Research Paper Forum
Topic: Paul's book
Replies: 17
Views: 29670

Paul's book

It's certainly more interesting than working on yet another implementation of some rubbish model, which seems to pass as 'research' these days.P
by Paul
December 29th, 2010, 5:49 pm
Forum: Book And Research Paper Forum
Topic: Paul's book
Replies: 17
Views: 29670

Paul's book

To be precise, Hoggard, Whalley and Wilmott derived a nonlinear PDE for derivatives valuation in the presence of transaction costs that is exactly the same nonlinear PDE as later derived by others as the Uncertain Vol Model. I.e. same nonlinear PDE, two different reasons!P
by Paul
December 28th, 2010, 9:36 am
Forum: Book And Research Paper Forum
Topic: Paul's book
Replies: 17
Views: 29670

Paul's book

It's out of print. PWOQF is essentially the second edition of Derivatives. So PWOQF2 is third edition! Title change because more is covered than just derivatives.P
by Paul
December 8th, 2010, 6:02 am
Forum: General Forum
Topic: Chaos Theory in Finance, any experience?
Replies: 7
Views: 24944

Chaos Theory in Finance, any experience?

<t>I looked into this in FX in the eighties. You can have a lot of fun with it, market microstructure modelling etc. Problem is that you need certain types of models to get chaos so you tend to follow the math rather than the finance. There's also too much freedom in the sense that many models will ...
by Paul
December 3rd, 2010, 11:01 am
Forum: Off Topic
Topic: Russia to host 2018 World Cup
Replies: 12
Views: 22176

Russia to host 2018 World Cup

FIFA is next after BoA for Wikileaks.P
by Paul
November 30th, 2010, 9:43 am
Forum: Careers Forum
Topic: Do Quants possess the intellectual muscle for tackling Millennium Problems ?
Replies: 35
Views: 28244

Do Quants possess the intellectual muscle for tackling Millennium Problems ?

Who would do better in a bank, Poincare or Perelman?P
by Paul
November 10th, 2010, 1:06 pm
Forum: General Forum
Topic: Plain vanilla swap valuation: one path or stochastics
Replies: 12
Views: 26178

Plain vanilla swap valuation: one path or stochastics

And it's rather circular if (part of) the curve comes from swap rates in the first place!P
by Paul
November 10th, 2010, 7:45 am
Forum: General Forum
Topic: Plain vanilla swap valuation: one path or stochastics
Replies: 12
Views: 26178

Plain vanilla swap valuation: one path or stochastics

<t>eh is right that for a vanilla swap you just need the discount curve. This is because the swap can be decomposed into a portfolio of bonds, exactly decomposed, in a completely model-independent way. You'll only need a model (typically stochastic) if your swap isn't a simple vanilla one, maybe bec...
by Paul
November 10th, 2010, 7:21 am
Forum: Technical Forum
Topic: risk neutral probability
Replies: 29
Views: 30006

risk neutral probability

<t>Almost nothing exists in reality in the way that it is represented in quant finance! Brownian motion, risk-free interest rate, continuous hedging,... Relax! We are only talking about so-so mathematical models! Most important is to understand what the concepts mean and to appreciate their limitati...