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I am looking for a good book and online resources to learn to build quantitative, statistical, and optimization models, measure and validate their effectiveness. Kindly advise. Thanks!

Statistics: Posted by kirti — January 30th, 2017, 12:27 pm

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I allow myself to share a recent paper on multiple curve models, joint work with C. Cuchiero and C. Fontana. Comments are welcome!

Link to paper

Abstract: We provide a general and tractable framework under which all multiple yield curve modeling approaches based on affine processes, be it short rate, Libor market, or HJM modeling, can be consolidated.

We model a numéraire process and multiplicative spreads between Libor rates and simply compounded OIS rates as functions of an underlying affine process. Besides allowing for ordered spreads and an exact fit to the initially observed term structures, this general framework leads to tractable valuation formulas for caplets and swaptions and embeds all existing multi-curve affine models. The proposed approach also gives rise to new developments, such as a short rate type model driven by a Wishart process, for which we derive a closed-form pricing formula for caplets.

The empirical performance of two specifications of our framework is illustrated by calibration to market data.

Cheers,

Alessandro

Statistics: Posted by agnoatto — December 29th, 2016, 9:02 am

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Statistics: Posted by Lapsilago — November 30th, 2016, 8:58 pm

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Statistics: Posted by Alan — November 17th, 2016, 3:57 pm

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1. How does the approach compare to other methods in various ways?

2. Stressing, e.g. large/small values of r and sig. e.g. see here

https://forum.wilmott.com/viewtopic.php?f=34&t=99385&p=771960&hilit=reference#p771960

3. Theoretical accuracy issues

4. Code; loops have if else logic .. choose P or C _once_ using a function outside the loop. Setting ptree initially to NaN is wise? when not set it to MAX_VALUE?

a presto

Statistics: Posted by Cuchulainn — November 15th, 2016, 9:37 pm

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Athos

Statistics: Posted by athos20145 — November 11th, 2016, 8:16 pm

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Not planning to do a book review here, but purchased this book and a bit disappointed to be honest. Derman is clearly a very respectable quant with major contributions on his name, but the book itself contains few, if any, new results. Also, some chapters such as the one on arbitrage bounds on the smile are very thin. From that perspective the books by Alan Lewis, Bergomi and Gatheral are still the most interesting. That said, Derman's book is fine to get a practical feel for volatility and fills the gap between the basic books and the more advanced texts.

Statistics: Posted by frolloos — October 12th, 2016, 3:15 pm

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Have you ordered this one yet?

The Volatility Smile - Emanuel Derman September 2016

On my shelf for the holiday break.

I have ordered it, but not got it yet, looks very interesting!

Statistics: Posted by Collector — October 5th, 2016, 9:20 am

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using Cholesky decomposition

yes, or alternatively Chu Shih-chien extended philosophy

Statistics: Posted by Collector — October 4th, 2016, 8:19 pm

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Collector wrote:Cuchulainn wrote:Resetting Strikes, Barrier and Time 2001 article.

Where can I find it? had a look at Articles but is a bit fubar.

W Magazine 2001, or Models on Models p. 157-164 (2007, basically same as 2001), it covers what we could call weak path dependence 1 asset case, same could easily be done for weak path dependent 2 asset case.

Unfortunately, I do not have access to either of above.

Are you saying that equation 7.3 can be used with let's say (to begin with to make it easy) for a barrier option by choosing g() as in 7.7 as some kind of modification of the payoff, e.g. checking the barrier reached and hence V = 0 for that term. Since we agreed that 7.7 is the same as binomial method and the latter works for barriers then 7.7 should be OK with barriers, yes? A bit like page 280 when you just take ITM values in the formula.

Not sure how you would do strike resets because where do you put reset dates into the formula?

What about formula #3 on page 306?

yes formula #3 on page 306 can be used for barriers (I guess a simplification of the H & H 2001 slightly more complex version of reset strike barriers, p. 310 ), but I would double check it against other models, like closed forms, long time since I we did this one. But method is very flexible as one can easily add many features to it, and price many type of strange barrier options and even include other path dependent properties by small modifications. The method is very flexible.

7.7 I don't think is okay with barriers without doing what is done on page 306 in addition, but combined one get long series of barrier option, for example Sinus barrier options

see also page 308 to 314

also send u a PM

Statistics: Posted by Collector — October 4th, 2016, 8:03 pm

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Cuchulainn wrote:Resetting Strikes, Barrier and Time 2001 article.

Where can I find it? had a look at Articles but is a bit fubar.

W Magazine 2001, or Models on Models p. 157-164 (2007, basically same as 2001), it covers what we could call weak path dependence 1 asset case, same could easily be done for weak path dependent 2 asset case.

Unfortunately, I do not have access to either of above.

Are you saying that equation 7.3 can be used with let's say (to begin with to make it easy) for a barrier option by choosing g() as in 7.7 as some kind of modification of the payoff, e.g. checking the barrier reached and hence V = 0 for that term. Since we agreed that 7.7 is the same as binomial method and the latter works for barriers then 7.7 should be OK with barriers, yes? A bit like page 280 when you just take ITM values in the formula.

Not sure how you would do strike resets because where do you put reset dates into the formula?

What about formula #3 on page 306?

Statistics: Posted by Cuchulainn — October 4th, 2016, 2:39 pm

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Where can I find it? had a look at Articles but is a bit fubar.

W Magazine 2001, or Models on Models p. 157-164 (2007, basically same as 2001), it covers what we could call weak path dependence 1 asset case, same could easily be done for weak path dependent 2 asset case.

Statistics: Posted by Collector — October 4th, 2016, 10:45 am

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