<t>Hi all,There must be someone here that has this book in his cupboard! Can someone give me a sanity check on the following?This one is coming from the book Econometrics of Financial Markets by Campbell, Lo and MacKinlay, chapter 12, about Nonlinearities in Financial Data. Page 470 mentions somethi...

<t>QuoteOriginally posted by: ntruwantIn my spare time, I am currently going through Steele’s “Stochastic calculus and financial applications”. To really understand what is going on, I try to proof every intermediary step myself. But there are a lot of them in the book…I don’t know the book of Plisk...

<t>Dear Jorgen,Let me give an example: you probably are familiar with the Black-Scholes formula. Now, this has been put into a solid mathematics formalism by Harrison & Kreps and Harrison & Pliska, somewhere in the beginning of the 80's. All this stuff about self-financing trading strategies...

In any case, I think comparing Pliska to Hull is like comparing apples and pears. Sure, Hull reads like a novel. But it is written in an entirely different fashion, with a lot more topics, going much less into the mathematics.

Hi all,Could someone spare some time explaining to me what a "stripped convertible bond" is? In general, the term "stripped", what does it mean? Maybe some examples?Thanks a lot in advance,Micha

<t>This happens more often in credit risk pricing. I wouldn't think too much of it. I guess it is a simplifying assumption. It makes an expectation of the product of an interest related factor and a default risk related factor factorize as the product of the expectations. If you don't have independe...

I guess this depends on the application. If your doing pricing you really should use the risk-neutral PD's. If your doing risk-management you should use real world PD's.

QuoteOriginally posted by: Cuchulainn> who thinks that Martingale is a type of bird.Since you began European or African?Somewhere in the middle...QuoteWhat is the average air speed?The speed with which it began to fly.

<t>QuoteOriginally posted by: friesenjungIf you take the Asset Swap spreads and compare them to CDSs, they're fairly similar (no arbitrage!). Since CDSs are determined by the implied default rate, the yields are as well. Or am I missing something?Schönbucher has some text on this in his book and he ...

<t>QuoteOriginally posted by: friesenjung those credit spreads are mostly determined y the probability of default. Is that actually true? I've now seen a number of papers in which they try to explain credit spreads. Findings are that credit spreads can only be explained by default probabilities only...

What about: you purchase the right to enter into a CDO for a certain strike and with some maturity?How would you value or risk manage it??? Kind regards, Micha

Or, chapter 8 of Schönbucher's book.

The price of an option satisfies a certain PDE with some boundary condition. Feynman-Kac gives the solution of this PDE in an expectation form.

I also have it. PM me if you need help.

<t>Dear all,Can someone explain me the following quote from Schönbucher's book, p. 39, l. 7: "In the initial example for the interest-rate swap there is no need for such a quantitative pricing model because the underlying exposure is easily replicated. A portfolio of a long asset swap package, a lon...