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by trinity
December 20th, 2013, 9:14 pm
Forum: Technical Forum
Topic: Computational time in rate models when rates go negative
Replies: 3
Views: 6278

Computational time in rate models when rates go negative

<t>Folks,In the summer of 2012 when rates hit the lows, I have a memory of hearing that a number of derivatives books had problems calculating their risk in their rates books. The key problem appeared to be the potential for rates to go below zero, and the inability of their models to deal with thos...
by trinity
March 3rd, 2008, 5:32 pm
Forum: General Forum
Topic: Reduced & Random Recovery?
Replies: 5
Views: 58704

Reduced & Random Recovery?

<t>There is definitely empirical evidence behind the supposition that recovery rates are negatively correlated with the default rate:1. “The Dependence of Recovery Rates and Defaults”, Yen-Ting Hu and William Perraudin2. “Default Recovery Rates in Credit Risk Modelling: A Review of the Literature an...
by trinity
July 3rd, 2006, 7:59 am
Forum: Numerical Methods Forum
Topic: KL Minimisation = s-o-s minimisation ?
Replies: 2
Views: 100230

KL Minimisation = s-o-s minimisation ?

Many thanks, makes sense. Thanks Scholar.
by trinity
July 2nd, 2006, 9:38 am
Forum: Numerical Methods Forum
Topic: KL Minimisation = s-o-s minimisation ?
Replies: 2
Views: 100230

KL Minimisation = s-o-s minimisation ?

<t>Is KL minimisation = min(sum-of-sqr error between densities) ?Let's say I have a parametric way of descrbing a probability distribution, and I am trying to choose parameter values such that I want to minimize the Kullback-Leibler distance between the distribution implied by my parameter choice an...
by trinity
June 19th, 2006, 11:20 pm
Forum: Technical Forum
Topic: Recursive Loss Model
Replies: 0
Views: 100906

Recursive Loss Model

<t>Could I please trouble someone for the recursion in "All Hedges in One Basket" by Andersen et al: either just the recursion itself, or a vba/matlab/r implementation, or a copy of the paper itself. If someone posts the paper or the recursion, I'll implement and post the implementation back here. T...
by trinity
June 3rd, 2006, 8:22 am
Forum: Technical Forum
Topic: How to choose an equivalent martingale measure in incomplete markets
Replies: 16
Views: 193737

How to choose an equivalent martingale measure in incomplete markets

<t>Dear Bearcat,When you say " There is a much better foundation rationalizing the entropy method than the usual axiomatic ones. It is the frequentist interpretation provided by large deviations theory. I described this in one of my earlier published option pricing papers" could I please trouble you...
by trinity
February 20th, 2006, 11:16 pm
Forum: Technical Forum
Topic: Entropy and Vasicak
Replies: 1
Views: 118000

Entropy and Vasicak

Anyone have a copy of "Introduction to the Entropy Pricing Theory" by Les Gulko ?
by trinity
February 20th, 2006, 2:01 pm
Forum: Technical Forum
Topic: Entropy and Vasicak
Replies: 1
Views: 118000

Entropy and Vasicak

Folks,Does anyone know of an attempt to link Vasiceks LHP model with an Entropy based model ? Or, to explain base correlation curves in an information theoretic context ?Thanks in advance for any pointers
by trinity
September 9th, 2005, 7:32 am
Forum: Technical Forum
Topic: Term Structure of Volatilies in Equities
Replies: 3
Views: 136948

Term Structure of Volatilies in Equities

<t>Hi Huopainen,Thanks. However, I gather you are really talking about the volatility smile/skew across strikes, and not the evolution of implieds along the maturity axis in your comments below. My question is really about the latter, i.e. what potentially explains the slope of implieds, be it by st...
by trinity
September 8th, 2005, 11:08 am
Forum: Technical Forum
Topic: Term Structure of Volatilies in Equities
Replies: 3
Views: 136948

Term Structure of Volatilies in Equities

<t>Hi Folks,Hope all is well.Interested to hear different views/opinions/sources which attempt to explain the term-structure of implieds in equities. There is a reasonable explanation of skew, i.e. leverage, but I haven't seen one for term-structure.It wouldn't be surprising if there was one descrip...
by trinity
August 11th, 2005, 2:07 pm
Forum: Technical Forum
Topic: Bespoked CDOs Implied Correlation with Heston model
Replies: 8
Views: 140515

Bespoked CDOs Implied Correlation with Heston model

trying to model implied correlation makes no sense... modelling the expected loss, and the tranche value as a derivative of that, probably makes more sense
by trinity
May 29th, 2005, 5:58 pm
Forum: Technical Forum
Topic: Barrier options and stochastic volatility
Replies: 25
Views: 195129

Barrier options and stochastic volatility

Hi Pat, Have you had a chance to take this any further, i.e. the pricing of barrier options using the results of a SABR model calibrated to the market ? Thanks
by trinity
May 29th, 2005, 5:53 pm
Forum: Technical Forum
Topic: Volatility Backbone for General Models
Replies: 8
Views: 192960

Volatility Backbone for General Models

Pat, what is the jump is a single jump-to-ruin, in the context of an equity process ? Would displaced diffusion be enough in that case ?
by trinity
May 24th, 2005, 4:16 pm
Forum: Technical Forum
Topic: Correlation Break Down !!!-Deathknell of Base Correlation
Replies: 19
Views: 153768

Correlation Break Down !!!-Deathknell of Base Correlation

<t>Hi,Apologises late reply. -1/(n-1) is for the average, so non-homogeneity shouldn't be an issue. If correlation were to go through this level, or as you rightly put it, the protection price above, one would sell the option/protection if comfortable with the Gaussian Copula assumptions. Under it's...
by trinity
May 20th, 2005, 12:48 pm
Forum: Technical Forum
Topic: Correlation Break Down !!!-Deathknell of Base Correlation
Replies: 19
Views: 153768

Correlation Break Down !!!-Deathknell of Base Correlation

<t>I think the theoretical floor for correlation on a gaussian coupling for n assets is -1/(n-1) where n is the number of assets, so:- for 2 asset, the floor is -100%- for 125 asset, the floor is -0.8%- for infinite assets, 0%A floor in the sense that an option (say, a call spread...) would lose val...