SERVING THE QUANTITATIVE FINANCE COMMUNITY

## Search found 15 matches

February 10th, 2017, 1:49 pm
Forum: Student Forum
Topic: Question on Ito's Lemma
Replies: 6
Views: 886

### Re: Question on Ito's Lemma

Yes, but when expanding the Taylor series and taking partial differential with respect to t-would you treat X as a constant? If yes, please let me know why is that the case.
February 10th, 2017, 1:16 pm
Forum: Student Forum
Topic: Question on Ito's Lemma
Replies: 6
Views: 886

### Re: Question on Ito's Lemma

yes, sure. I do not have Latex installed so would try and write the equations. The solution of Vasicek SDE is : R(t)= e -bt. R(0)+a. (1-e -bt )/b+ sigma.e -bt .X(t) where X(t) is an ito integral from 0 to t with a time deterministic integrand. Shreve defines f(t,x) as:  e -bt. R(0)+a. (1-e -bt )/b+ ...
February 10th, 2017, 12:29 pm
Forum: Student Forum
Topic: Question on Ito's Lemma
Replies: 6
Views: 886

### Question on Ito's Lemma

Hi, I was reading Shreve Vol 2 and had a question on application on Ito's Lemma for Vasicek Interest rate model in Chapter 4. While taking partial differential with respect to t for the function f(t,X(t)-the example treats X(t) as a constant. My question was that shouldn't X(t) -since its a function...
November 7th, 2016, 8:32 am
Forum: Technical Forum
Topic: Average/asian swap
Replies: 7
Views: 2070

### Re: Average/asian swap

Lets say we have average/asian swap whose floating leg payoff is dependent on the arithmatic average of the forward rates. Would these forward rates require convexity/timing adjustments? How would these adjuatments look like in a negative rate environment. Lets say this is a EUR swap. Any reference...
November 4th, 2016, 2:45 pm
Forum: Technical Forum
Topic: Average/asian swap
Replies: 7
Views: 2070

### Average/asian swap

Lets say we have average/asian swap whose floating leg payoff is dependent on the arithmatic average of the forward rates. Would these forward rates require convexity/timing adjustments? How would these adjuatments look like in a negative rate environment. Lets say this is a EUR swap. Any reference ...
August 2nd, 2016, 2:42 pm
Forum: Book And Research Paper Forum
Topic: Liquidity Horizon modelling
Replies: 1
Views: 1635

### Liquidity Horizon modelling

Hi,

Wanted to check if there are any research papers available to model the liquidity horizons (time taken to exit or hedge the position) for different traded asset classes. Do let me know if you have come across this before. Thanks.
June 1st, 2016, 5:32 am
Forum: Book And Research Paper Forum
Topic: Risk aggregation across different liquidity horizons
Replies: 0
Views: 1255

### Risk aggregation across different liquidity horizons

<t>Hi,I was looking for a good paper/book on how to arrive at aggregated economic capital when individual risks are modelled using different liquidity horizons. How correlation is calculated and taken into account is of particular interest to me. I would be greatful if you could suggest some useful ...
May 31st, 2016, 1:24 pm
Forum: Student Forum
Topic: Aggregating risk across different liquidity horizons
Replies: 0
Views: 617

### Aggregating risk across different liquidity horizons

<t>Hi,I was looking for a good paper/book on how to arrive at aggregated economic capital when individual risks are modelled using different liquidity horizon. How correlation is calculated and taken into account is of particular interest to me. I would be greatful if you could suggest some useful r...
May 12th, 2016, 1:21 pm
Forum: Student Forum
Topic: Risk Aggregation
Replies: 5
Views: 1005

### Risk Aggregation

<t>Hi, i will try and be more clear. I have two random variables X1 and X2 which have defined (but different) distributions. X1 and X2 can take any real number value. I want to calculate the probability of X1+X2<S where S is a real number. Could you please suggest some computationally efficient ways...
May 12th, 2016, 11:01 am
Forum: Student Forum
Topic: Risk Aggregation
Replies: 5
Views: 1005

### Risk Aggregation

<t>Hi,I wanted to aggregate two independent random variables-which depict the PnL numbers. The problem is that i dont have a ordered pair (i.e. a one to one mapping ) for the two random variables. I was thinking of using FFT or Panjer recursion but what i could find from my research is that it is ap...
April 21st, 2016, 5:49 am
Forum: Student Forum
Topic: VaR scaling
Replies: 5
Views: 1227

### VaR scaling

<r>Thats what my understanding was too. But this paper:<URL url="http://web.econ.ku.dk/fru/conference/Programme/friday/a4/provizionatou_empirical%20scaling%20rule.pdfand"><LINK_TEXT text="http://web.econ.ku.dk/fru/conference/Pr ... ule.pdfand">http://web.econ.ku.dk/fru/conference/Programme/friday/a4...
April 20th, 2016, 1:35 pm
Forum: Student Forum
Topic: VaR scaling
Replies: 5
Views: 1227

### VaR scaling

Hi, i wanted to check on the square root of time scaling method for VaR. I understand that it assumes the underlying P&L distribution to be i.i.d. But does it also need to be normal? If yes, could you please elaborate on why normality assumption is needed. Many thanks for your reply.
February 2nd, 2015, 2:27 pm
Forum: Student Forum
Topic: A question on probabilities
Replies: 2
Views: 3288

### A question on probabilities

<t>Hi,I have an equity derivative which I want to value. In this derivative, there are a set of monthly observation dates out till 2 years and if the spot is higher than 160% of the strike on any of these dates, then the option knocks-out and pays a rebate. If the event does not happen, it offers a ...
September 10th, 2014, 2:28 pm
Forum: Student Forum
Topic: Using futures for curve construction
Replies: 4
Views: 3622

### Using futures for curve construction

Thanks for answering. I know that. But doesn't this violate the consistency principle that your instruments should have similar level of creditworthiness?Also, wouldn't this also violate thr forward rate estimation formulawhich assumes similar level of credit risk?
September 10th, 2014, 1:22 pm
Forum: Student Forum
Topic: Using futures for curve construction
Replies: 4
Views: 3622

### Using futures for curve construction

<t>Hi,I wanted to know if it is ok to use futures in curve construction along with depos/swap rates (i am talking about uncollateralized swaps here). I ask because the credit risk of futures is lower as compared to swaps and deposits. so wouldn't that lead to inconsistencies? The other option is to ...

GZIP: On