Thanks alot everyone

<t>Just a thought, why not try and get into a quant role at a commodity trading house(or utility) that trades electricity. I know the industry isn't getting the best rap at the moment post Enron, but it is still around. It may help you get the edge by you abilty to undestand the physcial commodity b...

Reza,You wouldn't happen to know anywhere that details the errors in the paper would you? Are the erros in the formulas or in the example numbers?Cheers,Troy

Reza,Thanks, could you tell me the address of emanuel dermans website. I did find links to the old goldmans website but they no longer exist and the new goldmans website doesn't seem to have the paper.Cheers,Troy

for some formal proofs of convex payoff functions and the relation of increasing volatility to option price see "Huang, Chi-fu and Litzenberger, 1998, foundations for financial economics"

Does anyone know any references (websites or books) that have some calculated examples of a Derman and Kani binomial tree(or some pseudo code). I am trying to code one up and want something to cross check my implementation against. Cheers,Troy

<t>I got it to workthanks, sam and monk.Palsky, Interesting point. Why not use daily observations then? or even tick by tick data? (I do realise you then have some problems with stationarity variance, but at least you will have enough data points). And yeah I realise GBM, isn' t a perfect fit, but I...

<t>I am simulating Geometric Brownian MotionI am using the following processS(t) = S(t-1)*Exp((u - .5 * sigma^2)dt + sigma * nrand * dt^.5) where nrand~N(0,1)I am trying then to fit a lognormal curve to the final price outcomes of the price pathsWhat mean and variance should I use for the lognormal ...