I got it.

Dear all,

I'm trying to parametrize a local vol surface from the Dupire formula as pointed out in PWOQF. My final result looks different from those derived by Paul (eq 25.7).

What is wrong?

Thanks.

a local vol model is not a good model for most markets.
Could you please elaborate on this? (Why?)
Thanks.

<t><br/> Thank you, Aaron.<br/> <br/> The reason I asked this question is that I am currently studying the local volatility surface modeling. In papers of Dupire and other authors, there are used European option prices to build the local volatility surface.<br/> <br/> In case of index options, which...

Is put-call parity valid for american options?
Which options are used to imply volatility matrix, european or american ones?

Thanks.

<t>Hello!I've got a question concerning the Black's model for caps/floors pricing. In the Black's model, one should input the cap rate Rx and the forward rate Rf which are expressed with a compounding frequency equal to the frequency of resets.So that one should1) Interpolate the market yield curve ...

Let me know your email address. The file size is about 1.4MB, so it's too large to upload here.

<t><br/> A potentially cleaner approach is to take a short rate model, and calibrate it to all the caps, and then use it to price the caplets <br/> <br/> I am a bit confused. At the beginning, one should calibrate a spot rate model to all the caps. As a result, the spot rate model is consistent with...

<t><br/> The BGM takes as an input vols implied by the Black's model. Interest rate caps are usually quoted in terms of flat vols, so that cap flat vols are always available. To implement BGM, one must strip them to get the caplet vols (get a reasonable set of caplet vols so the sum of the caplets g...

<t><br/> I once checked different estimators for the mean reversion rate for the Vasicek model with the Monte Carlo by generating artificial time series with the known mean reversion rate and then re-calculating it using the estimator.<br/> <br/> I tried this to estimate spot rate models as well. I ...

<t><br/> I've found something about these tests in the SAS system help.<br/> <br/> The Shapiro-Wilk statistic is the ratio of the best estimator of the variance (based on the square of a linear combination of the order statistics) to the usual corrected sum of squares estimator of the variance. W mu...

<t><br/> I often use SAS which simultaneously calculates value and p-value for four test statistics: Shapiro-Wilk, Kolmogorov-Smirnov, Cramer-von Mises, and Anderson-Darling. As I remember, I've never met a situation when for a given level of confidence (95%) one or more tests indicate that data is ...

<t><br/> In 90th the idea of indexing became very popular. Indexing is designed to track a broad market index, e.g. S&P500, with a portfolio whose weights are different from those of the index (say portfolio consisting of 50 stocks).<br/> <br/> An advantage of this strategy over MVO is that inde...

Attached is Black and Scholes (1973) paper. Let me know if you would like to get a higher quality pdf.

I hope this will help

And we have the thread with the similar subject.
Nelson-Siegel to model the yield curve ?