<t>QuoteOriginally posted by: cpulmanThe risk free rate is also a nominal rate which cannot go negative (ok, maybe it could, but that would likely cause a balance of payments crisis as capital flees the country, so no responsbile central bank would ever contemplate such a policy), which is itself th...

If the cost of holding cash is high enough, nominal interest rates can be negative--you'd probably want to invest your cash at a negative yield rather than store it in your matress. If the risk free rate got negative enough, LIBOR could also get negative.

<t>QuoteOriginally posted by: Gmike2000i hear that a lot about the so called "traders option". ok, so the worst that can happen is that you get fired. however, you can only blow up so many times...i dont think traders exploit this option that much. The majority of investors I've seen manage risk int...

<t>It's the trader's option. When you sell options, you'll make decent money most years and get paid a nice bonus. When it doesn't work (e.g., the current subprime situation), you'll lose a spectacular amount of money and get fired, but the worst thing that can happen is that you have to give back s...

I heard Stanford is going to wave tuition of your parents make less than $100K/year. Probably only applies to undergrads though.

<t>I'm not sure how to calculate the DV01 of the floating side of a swap. If LIBOR has been fixed, the swap is quarterly, and the principal is $100, are you supposed to assume the next floating payment is 100*(1+LIBOR/4) (which Bloomberg seems to use) or just 100*LIBOR/4 (which I think you should us...

Dangit. I meant the first 4 ED contracts. Sorry for the confusion.

<t>I've been trying to use the Fincad swap curve spreadsheet with US deposits, Eurodollars, and swaps. I can get it to be close to Bloomberg when I don't include Eurodollars. But when I include the first 8 eurodollar contracts, it's more than 1 bp different from the quotes I get from dealers. The co...

<r>QuoteOriginally posted by: asdfasdfQuoteIf you really want to define, you have to make sure your definition is "operational", that you can measure, For this reason, in the US a recession is defined as a DECLINE in any country's gross domestic product (GDP), or negative real economic growth, for t...

It's almost certainly a timing issue. Libor is set 1x per day. ED futures and and swaps trade continuously. Usually, it doesn't matter all that much, but Libor's been super-volatile lately.

<t>There is no strict definition of the word "recession". In the U.S., there's a recession if a group called "The Business Cycle Dating Committee" at the NBER decides that we're having (or we had) one. Usually, this decision is made well into (or even after) the recession, so it's not all that usefu...

There's a good chapter on the Kalman filter in the book "Time Series Analysis" by James Hamilton.

<t>QuoteOriginally posted by: msperlinI don't understand your question. Constraint, which constraint ??Can you clarify ?In the example I gave, you'll run a linear regression like:Y = (c1*c2)*x1*b1 + (c1*c3)*x1*b2 = d1*x1*b1 + d2*x1*b2.You'll get estimates of d1 = c1*c2 and d2 = c1*c3. To figure out ...

<t>Is it possible to identify the original parameters without a constraint? For example, think of the simpler equationY = c1*x1 * (c2*b1 + c3*b2).Looking at the scatterplot of the (x1, Y) data, you'd fit an equation like this if the cloud of Ford points appeared to have a different slope from the cl...

I've heard that every freaking quant fund is blowing up.