<t>Suppose that X(t) is a Wiener process. I understand that dX(t)/dt is not well defined, because although X(t) is continuous, it is not continuously differentiable. However if V = f(X(t), t) (e.g. V is could be a call option price), then one can write:which is one of the terms in the Ito expansion ...

What is it ? How does it work ? Where are the risks ? The PnL ? What products can one make markets in: plain vanilla calls and puts, warrants, structured products, European, American ?Can someone in this area offer a guide to the uninitiated ?

What is it ? How does it work ? Where are the risks ? The PnL ? What products can one make markets in: plain vanilla calls and puts, warrants, structured products, European, American ?Can someone in this area offer a guide to the uninitiated ?

<t>From what I learned on my continuous-time pricing theory course (taught by Helyette Geman): they are the same only when interest rates are non-stochastic, or, if IR are stochastic then only when the underying is uncorrelated with IR. Stochastic interest rates introduce a complexity into the risk-...

Why don't you just contact the school administrator for the Fin. Eng. programme. I don't think you're too late, but you're pushing it.

<t>I've just completed my exams on the MSc Finance at Birkbeck, and I'm hunting for a suitable topic for my dissertation. My first-cut choice was to look at Fourier Transform pricing of spark-spread options and their calibration, but this is well covered in the literature (IMO), and I can't see what...

<t>I've been studying GARCH models on my stats course, and recently had the opportunity to discuss GARCH with some options traders. My question related to whether GARCH could be used to forecast realized vol and thus build a trading strategy against implied vol from the option (I appreciate this mig...

How can I differentiate the following:when r follows the SDE:My first instinct was to apply a Taylor series expansion, but I guess this is not acceptable because r is stochastic. Can anyone help?

<t>If it's a quant job then you are well advised to prepare for some technical questions - either written or spoken. You might get asked some product specific stuff, or just some general "can you think straight" questions (Monty-Hall problem was always a favourite, but is too widely known about toda...

I also directed the original poster to Hull. This time I will be more specific: read Hull (6th edition) p. 77: "Business Snapshot 4.1". Enuff said I think.

Have a look at Tim Crack's "Heard on the Street".

And the point of your post is what exactly?

<t>Hull has some comments on thistopic. Derivatives pricers use LIBOR or EURIBOR rather then T-bills to estimate the risk-free rate because they consider the rate derived from T-bills to be biased by:1. The regulatory requirement of certain institutions to hold T-bills2. T-bill tax treatments differ...

Hi RufusThanks for that; I will check out Oksendal. BTW all the presentations of FK I've seen are for going from PDE -> expectation.

<t>There is a proof technique in chapter 21 of Neftici's book "Introduction to the Mathematics of Financial Derivatives" for deriving a PDE directly from an expectation. He shows this for the case of:by deriving the PDE satisfied by the price of a zero coupon discount bond. Has anyone seen or used t...