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by complyorexplain
July 24th, 2020, 8:11 am
Forum: General Forum
Topic: VaR for a life insurance company
Replies: 3
Views: 238

Re: VaR for a life insurance company

To answer your last question, I have considerable experience in VaR models for insurance companies, having worked as a specialist on the Solvency II capital project for many years. First thing to know is that insurance VaR models are not market consistent and often violate no-arbitrage, so do you wa...
by complyorexplain
July 21st, 2020, 6:58 pm
Forum: General Forum
Topic: Trading puzzle
Replies: 16
Views: 1056

Re: Trading puzzle

Here is the underlying thought experiment. Price starts at F. Trader starts flat, waits some time, not specified, and then if the price is greater than F, i.e. F+delta-F, for unspecified but positive delta-F, buys some amount at F+delta-F. The amount to buy is some constant g times delta-F.   If pr...
by complyorexplain
July 19th, 2020, 10:30 am
Forum: General Forum
Topic: Trading puzzle
Replies: 16
Views: 1056

Re: Trading puzzle

It was Henri Lebesgue who called it a paradox, not I!

The reason I asked here was that we have taken this 'puzzle' to two separate mathematicians, one of them eminent by any standard, but they disagree on the result. No intention to troll, apologies.
by complyorexplain
July 17th, 2020, 10:49 pm
Forum: General Forum
Topic: Trading puzzle
Replies: 16
Views: 1056

Re: Trading puzzle

Henri Léon Lebesgue (1875-1941), Measure and the Integral , edited with a biographical essay by Kenneth Ownsworth May (1915-1977), The Mathesis Series, Holden-Day, 1966, xii + 194 pages. Formerly, when I was a schoolboy, the teachers and pupils had been satisfied with this reasoning by passage to th...
by complyorexplain
July 17th, 2020, 10:26 pm
Forum: General Forum
Topic: Trading puzzle
Replies: 16
Views: 1056

Re: Trading puzzle

But I googled the concept. I don't see any probability in the OP's setup. 
Yes correct. Nothing to do with probability. The puzzle is that at the limit the price never changes. So how can any profit or loss be made.
by complyorexplain
July 17th, 2020, 8:15 am
Forum: General Forum
Topic: Trading puzzle
Replies: 16
Views: 1056

Re: Trading puzzle

I am posting this because someone else expressed a doubt. 
by complyorexplain
July 16th, 2020, 1:17 pm
Forum: General Forum
Topic: Trading puzzle
Replies: 16
Views: 1056

Trading puzzle

http://eumaeus.org/wordp/wp-content/uploads/2020/07/puzzle.jpg See the chart above, and start with the red line. We buy a quantity X at a price of 12, then sell when the price returns to 10, and so on. Each time we lose the change in price times the amount held = X(12-10) = 2X, which happens 4 time...
by complyorexplain
June 8th, 2020, 9:22 pm
Forum: General Forum
Topic: Black Scholes Merton PDE
Replies: 8
Views: 4615

Re: Black Scholes Merton PDE

Thanks again!
by complyorexplain
June 8th, 2020, 12:17 pm
Forum: General Forum
Topic: Black Scholes Merton PDE
Replies: 8
Views: 4615

Re: Black Scholes Merton PDE

Thank you.
by complyorexplain
June 7th, 2020, 12:43 pm
Forum: General Forum
Topic: Black Scholes Merton PDE
Replies: 8
Views: 4615

Black Scholes Merton PDE

BS write in their original 1973 paper  that t here is only one formula w(x,t) that satisfies the PDE (their equation 7) subject to the boundary condition of their equation  (8). They don't actually prove the uniqueness of their result. Is it necessary to prove it? Every uniqueness proof of other PDE...
by complyorexplain
June 6th, 2020, 8:55 am
Forum: General Forum
Topic: Trend following and range trading
Replies: 4
Views: 2310

Re: Trend following and range trading

Thanks for these comments (and particularly the reference to Jarrow and Carr). We formalise the idea of 'trend following' and 'range trading' within a paragraph or two, the sentence quoted is in the introductory paragraph. Co-writer is a gifted economist who has published widely in the field of mone...
by complyorexplain
June 5th, 2020, 9:32 pm
Forum: General Forum
Topic: Trend following and range trading
Replies: 4
Views: 2310

Trend following and range trading

We are preparing a paper for an economics journal and co-writer has questioned terminology.  We are saying that it is "familiar to trend-following traders who buy on rises and sell on dips, that such a trend-following strategy will gradually lose money if the price remains within a range". Will most...
by complyorexplain
February 16th, 2019, 10:46 pm
Forum: General Forum
Topic: Option on a portfolio
Replies: 4
Views: 842

Re: Option on a portfolio

It's just a portfolio of options: buy N single name puts on the individual assets. By the "law of one price", that would be the cost for what you want.
(Smacks head). Yes, that is exactly it.

(To Bearish) silly title for the post. Should have been 'Portfolio of options'.

Thanks all.
by complyorexplain
February 16th, 2019, 5:25 pm
Forum: General Forum
Topic: Option on a portfolio
Replies: 4
Views: 842

Option on a portfolio

I have looked for, but cannot find, an option where you take all the losses on a portfolio of assets below a certain %. I.e. specify the assets to which the option applies, the notional amount held in each, and the starting price for each. Then agree to take all losses where the fall at expiry excee...
by complyorexplain
May 19th, 2016, 2:57 pm
Forum: General Forum
Topic: Unhedged options thought experiment
Replies: 16
Views: 1480

Unhedged options thought experiment

<t>QuoteOriginally posted by: list1The question is about how we value the respective positions of the option and the trading (=delta1) desks. /// The original question was about that the Black Scholes formula is inappropriate in the case where assets are illiquid.So, moving to the valuation of the t...
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