<t>Hi! Did you check out this thread on the technical forum? Basically this is a problem to be solved by the backward Kolmogorov equation with the probability being 1 at the boundary S=X. Well... Might be wrong on the details, but that's the framework. Check out more about these density functions in...

<t>I came into a discussion a while ago on this topic, regarding the status of the different Nobel prices, and took the position that at least finance, and I guess also economics, DO qualify as a science. (Btw some descendants of Alfred Nobel wants the price in economics to be removed from the Nobel...

I don't really know this stuff, but I think that a barrier at S=0 requires a jump-model (jumps to S=0) to make sense for the reason DiceMan gives, i.e. that in the the BS-world (log-normal random walk) the risk-neutral probabality of hitting S=0 is zero.

<t>Hmm. Don't forget Itô! I.e. the error must be Taylorexpanded up to the 2nd derivative (as I am sure Omar knows very well). PW is correct, the other is also correct but only if you take that drift minus variance/2. In symbols we have approximately:P(0)*EXP[(mu-sigma^2/2)*dt + sigma*dX] = P(0)*(1+m...

<t>Reza!I really want to do all these calculations myself for V(S) and E(tau) for all possible combinations ofr >0, =0, <0S/K <1, and >1mu >0,=0, and <0 and I am going to do that, at least for my own peace of mind. I know I can do it. But when? I consider myself being nothing less than a hero if it ...

<t>But Taylor expansions is about the first thing you learn in the first university analysis course (differentiation, integrals, ODE). I think that every math oriented education should have that + some algebra (vectors, matrixes, linear maps etc) as a minimum. Then, I think it is hard to remove anyt...

Dominique, That was the one I described. Sorry that I first wrote "moving window Asian with early strike". Just a mistake. Now it is changed (using the "edit" button).

<t>OK, I will try again with an example. Let's say that you have a moving window Asian with early exercise (i.e. Am. type = exercise whenever the holder wants). Payoff = Max(A-K,0), i.e. A-K if A>K otherwhise 0Strike = K = 100 in my exampleWindow = D days = 1 week = 5 trading daysAve. type = arithme...

<t>DominiqueSay that the payoff function is Max(A-K,0) where K = 100, and the average is calculated over 1 week, but the option still has 1 month to live. So the holder calculates A and find that it is 115. Then he can exercise the option and get 15... Which he would not if the share price S is 125 ...

<t>Yes, Asian means that the payoff is a function of an average of some sort over the whole life time of the option. Then there are also Asian tails where the ave. is just taken over the last part of the options's life, e.g. the last week or even just the last day. A moving window Asian with early e...

<t>The real question is "So what?". We need to do something with all these words or they are just that: words. Sure. I am sceptical too. Could have been clearer on that. But I still find these words fascinating. I also like the thermodynamic idea. Then what is the temperature in this case? Volatilit...

<t>the surname of that someone has typically started with the letter W >>Yihaa! That's me! But my background is more in general relativity... Btw, How do you guys like Kirill Ilinski's book on "Physics of Finance"? Paul has a positive review on it here. I just looked a little in the book. Seems like...

<t>yolanda! I will remember that! Thank you. I think the architect's name was Gaudi, and he is also famous for some other amazing buildings in Barcelona. He was, I think, very inspired by natural shapes such as trees and clouds. That makes his buildings very special. And expensive too I guess. And s...

<t>Hamilton, congrat's for your fancy house! But just to annoy You Mr Right Honorable William, may I ask how many hours do you spend on the road every day between your work and your house? My flat is a lot smaller, but I can walk to the theatres, movies, and the nice restaurants... Sour grapes. Yola...

<t>Aside: do you think the "houses to buy market" is correlated to "houses to rent market"? One could think "if less people want to buy then more >>That depends of course on if both of these markets are free. In Stockholm the rental market is heavily regulated, with artificially low rents at central...