I see, yes fair point thanks.

<t>Thanks Dave.I think you are confusing two related but different things.My goal is not necessarily to reduce the std error of the price.On the face of it, reusing the same numbers for both sets of paths (or 3 or 4 sets of paths if it's a gamma, etc) _eliminates_ the std error of my risk calculatio...

<t>Hi there,Let's say I want to calculate the delta. I can price my instrument using Monte Carlo through PV = PV(S), where S is spot of the underlying.So I calculateDelta = [PV(S+epsilon) - PV(S)] / epsilonMy question is, is it standard practice to reuse the same random numbers in both price calcula...

>what kind of information can trader get from a quant model?price, risk>how to make profit from margins?pocket them

<t>What you are describing sounds more like proprietary (prop) trading, where traders take risky positions with a speculative stance.So far as I know, most desks in investment banking need to keep their positions hedged (ideally zero risk), and the profit comes from the margins, not from their view ...

<t>Hi there,I'm trying to justify/prove that "in a delta-neutral portfolio, when Theta is large and positive, Gamma tends to be large and negative".This statement, which I'm sure is correct, normally sits by the following equations, which I know how to derive- although I don't quite understand why i...

<r>This is an often-cited paper and it is quite readableFrancis A. Longstaff, Anderson School at UCLAEduardo S. Schwartz, UCLA"Valuing American Options by Simulation: A Simple Least-Squares Approach"<URL url="http://repositories.cdlib.org/cgi/viewcontent.cgi?article=1286&context=anderson/fin"><L...

No, the OP is correct, for normal multivariate distributions the converse *also* holds. (Sorry, no proof)

Sorry, I left out the strike, thus breaking the beautiful asset/cash symmetry. I meant (taking any convenience yield q into account)Might still be wrong, I'll try to prove it when I have a second.Thanks

I'm not sure if this way of asking for help should be encouraged with an answer.On the other hand, this is a rare occasion for me to be useful in this forum, so here goes.I can't find it on Hull, but I'm pretty sure it's correct.

<t>HiIf my memory serves me right, necessary and sufficient condition for an ARMA process to be stationary is that its poles are all within the unit circle in the complex plane. So all MA(n) processes are stable (it's a low-pass filter at the end of the day, finite impulse response) and if you have ...

Interesting, thanks everybody.MCarreira, it's strange you would get a linear ratio, I had expected S^2 or 1/S^2...Cheers

Sure, but it's the same in both formulae, no?I suspect there's something special about n(d(S))) that somehow neutralises the S^2 both "in the large" and "in the small".Basically my question is, how can the plot of a f(x) look the same as x^2 * f(x)? (Aside from a scaling factor?)

The analytical expressions for Gamma and Vega of an European call areWhen plotted against S, they look very similar, and yet basically Vega = k * Gamma * S^2.What am I missing?Thanks for help.

Thanks gjlipman. But I would really like to prove the result.For KN(d_2), I see how that is my expected cost (K multiplied by the probability of being in the money at maturity=N(d_2)), but for the first part I'm at a loss.Thanks in advance...