<t>I am sure the answer is very simple and I apologize for my ignorance. The question is how to reconcile different valuations in different currencies when the payoff depends onFX between them. For example, let's say that 1 USD is equal 90 yen. The payoff 100 yen to occur on Jan.1 2015 if this FX at...

<t>We are trying to come up with a robust system of counterparty limits for our derivatives portfolio. Currently, our limits are on maximum potential future exposure (at 95th eVaR level) using simulation to model interactions of market risk factors and the dynamics of the portfolio across time. The ...

<t>Vladimir,We also tried and failed to reproduce calibration results even with 3m splines for sigma and delta. Results for "nu" are much closer to yours than the results for "beta". Interestingly, in the beginning "beta" is very close to yours, -200, -174 but then the deviation begins and in the en...

<t>We recently implemented the Libor Market Model and plan to implement the Piterbarg's FX model. It appears that FX spot/forward volatility correction is naturally expressed via log-normal volatilities of discount bonds, which in turn are naturally related to normal volatilities of short rates.We w...

SUMMIT came up with the new module called MUST. The objective is to extend SUMMIT pricing capabilities to all kinds of structured notes and swaps.Any comments from the end users? How good the pricing is ? Shortcomings ?Thanks a lot

Yes, I plan to write generic MC for multidimensional SABR, every time I have volatility fixed (for equity or FX) I'll just makevol of vol equal to 0. No local volatility.I will use it for LIBOR, commodity, FX, and equity.What do you think?

<t>Dear Cuchulain,Thank you for the offer. I prefer to do my own design but I leave the door open to show me that I am not capable.Hence, the post. Is there anything wrong with the scheme I proposed in my initial post?Devil is in details. For example, here are some details for IR modeling.1) Volatil...

<t>Yes, thank you. I am familiar with MUST, Numerix, and some other stuff.I appreciate the concern. Not to worry! I am talking about core computational engine in MatLab,no interface, no overhead. I anticipate, simulation framework and Longstaff won't take much to implement in MatLab. Calibration rou...

<t>A Parsimonious Framework for Pricing Future Generation Structured Notes The objective is to build a versatile framework that can be quickly readjusted to price all kinds of complex structured notes, including interest rate-, FX-, equity-, and commodity-linked notes. Possibly with path-dependent f...

<t>Dear ZThank you very much for the interesting remark. I didn't have time yet to think it over but it passes immediate common sense test.I will think more.Alan, WahooThe problem is credit exposure over the long time horizon. I wish I had more time to explain everything to you. But curve simulation...

This formula is in Peter Jaeckel's book "Monte-Carlo Methods in Finance", p.125,derivation on page 138.Formula for variance is p*(1-p)*(T2-T1)

<t>Yes, Alan, Wahoo, thank you for your commentsAlan, I don't immediately see why it doesn't exist. Wahoo, I understand that if distribution exists at all. there will be many possible solutions.I am interested in any solution. I also realize that copula framework may not be the best one for the prob...

<t>wahoo,You are quite right, when I said multivariate nonstandard normal I meant non Gaussian.You are also right about copula approach.I thought, I was clear with my question. Given marginals, pairwise linear correlation, and thenon top of that monotonicity. What kind of copula is this ? Why is thi...

<t>Alan,Not only the suggested algorithm inefficient but if you start eliminating draws that do not conformto monotonicity you'd change correlations, as well.Think about it. All the standard routines deal with original independent draw that is later changedto conform to correlation matrix. The net r...