Thanks a lot. My gut feeling is that negative probability will cause Arrow-Debrew price. Therefore, it causes arbitrage. Not sure, how should I get rid of it in trinomial tree.

<t>I was pricing a option with big dividend in the underlying. However, I got negative transition probability in a trinomial tree. Will it cause arbitrage? Does anyone have reference paper or book chapter can share?I failed to find the following paper. The paper suppose to discuss negative probabili...

No worries, I ran a 12 variable VAR today , R -squared and RMSE tends to be way better than that of 12 independent ARIMA.

I am implementing CreditGrades model by Python for a CDS trading strategy.However, the spread I fitted is far below market spread in recent years.And sometimes the CDS value is negative. Can anybody shed some light or share some code?I will highly appreciate your help.ThanksFiona