<t>Well, I did mention about the term structure towards the end.I just wanted to make some points regarding skew/smile first clear, since the term struct is linked to it. short term vol higher than long-term - because of jump risk, pin risk, realized volatility is mean revertingThese are just some f...

I found one excel file with the CF on cells- where can I mail it?

<t>The current thinking, which is not fully accepted by oldskool academics, is that negative volatility slope is not due to leverage - at best it explains something like 20% of the skew.Also, the volatility curves for stock index and single stocks are different - the index is more or less a regular ...

I'm not that sure, but for some series CF seems to behave funnily - I did a CF VaR calculation on one hedge fund strategy, and the one month 99% loss was actually a positive number! I'll try and dig up my Excel shait for that case

Ummm... it might help if you mentioned which products you are interested in... )

<t>The "fast markets = crash" is only relevant in stock indices. Single stocks, currencies and so on do not behave in a similar fashion. THis kind of analysis (call it conditional correlation for the lack of a better term) is quite a good idea - e.g. FX prices can "crash" both to the upside and the ...

<t>I guess what you are after is checking if the LEVELS of two stock prices have any meaningful effect on the correlation between the returns.The reasoning for this is that the standard correlation is timevarying. Checking how the correlation changes when prices are high, or when one price is high r...

If you need the Excel VBA code for Garman-Kohlhagen and vol curve estimation based on RR/STR/ATM vol quotes, let me know.

A bit too easy, perhaps. At least MD's had difficult time with this

<t>We are studying a group of 10,000 people. We know that 100 of them have the Disease. A test can be used to solve if a person has the Disease, but it is not perfectly accurate. If a person has the Disease, the person will test positive 99% of the time and negative 1% of the time. Conversely, even ...

<t>Sorry about the late reply.No, I have not done the option price vs skewness or kurtosis myself – previous research has measured the relationship of implied risk reversal (=implied skewness) and the future skewness of the results for the major currency pairs. Results: risk reversal is a lousy pred...

<t>I agree - kurtosis of the underlying distribution would explain this at least partially - but there are some articles arguing it is at best only partial, esp. since 3rd implied moment is following an ARCH process.On top of the trading simulations and RR modeling, other stuff I plan to include are...

<t>ANDYM: Let me rephrase without shortcuts: the changed expectations in the first moment work wonderfully, with any risk premium being minimal. The second moment, implied volatilities (expectations of volatility to come) also seem to work fine. The third moment, implied skewness does not forecast s...

<t>Well, almost. I was on the sales side, but did some occasional arb when things got slow. Locating and executing true arb or even so-called stat-arb requires massive investments of time - the profit margins are actually better when you are just enjoying the flow. I don't get your point-any edge in...

<t>Kind of helped that I sat 9 years in an options desk (then came the euro...). Besides, recession is a good time to get the degree. Put it this way, my thesis supervisors were clearly quite unhappy with my subject and preliminary results. The Campa Chang Reider paper kind of saved my behind. So ho...