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by woodsdevil
April 11th, 2022, 12:12 am
Forum: Technical Forum
Topic: Two-factor Interest Rates model: intuitive parameters ?
Replies: 15
Views: 1928

Re: Two-factor Interest Rates model: intuitive parameters ?

Thanks for your reply.  I'm basically after a parametrisation where for instance the instantaneous correlation is driven by one parameter, e.g. <dr(t), df(t,+inf)> = rho.dt, and the mean reversion speed help to control only the mean reversion speed of the short rate and the long-short spread separat...
by woodsdevil
April 10th, 2022, 7:59 am
Forum: Technical Forum
Topic: Two-factor Interest Rates model: intuitive parameters ?
Replies: 15
Views: 1928

Two-factor Interest Rates model: intuitive parameters ?

Hi. If one posits the usual two-factor model as either: df(t, T) = (...)dt + exp(-mrs1*(T-t))*sigma1*dW1 + exp(-mrs2*(T-t))*sigma2*dW2 or dr(t) = (theta + u - lambda1*r(t))*dt + sigma1*dW1 u is another correlated OU process where we assume <dW1, dW2> = rho.dt then both representations are of course ...
by woodsdevil
April 10th, 2022, 7:58 am
Forum: General Forum
Topic: Two-factor Interest Rates model: intuitive parameters ?
Replies: 0
Views: 1505

Two-factor Interest Rates model: intuitive parameters ?

Hi. If one posits the usual two-factor model as either: df(t, T) = (...)dt + exp(-mrs1*(T-t))*sigma1*dW1 + exp(-mrs2*(T-t))*sigma2*dW2 or dr(t) = (theta + u - lambda1*r(t))*dt + sigma1*dW1 u is another correlated OU process where we assume <dW1, dW2> = rho.dt then both representations are of course ...
by woodsdevil
February 2nd, 2020, 5:07 am
Forum: Numerical Methods Forum
Topic: Simulate any Copula in MC
Replies: 0
Views: 7989

Simulate any Copula in MC

Hi. Suppose that you know the joint distribution of N variables {Xi}, i.e. the Copula function as well as the individual marginals, i.e. Fi(alpha) = P(Xi < alpha), and C(a1,a2,..,an) = P(X1<a1,...,Xn<an). The Copula can be anything that is a valid Copula of course, but definitely not necessarily Gau...
by woodsdevil
March 8th, 2016, 10:22 am
Forum: Technical Forum
Topic: SABR with mean reversion speed - approximations ?
Replies: 2
Views: 2212

SABR with mean reversion speed - approximations ?

Hi,Is there analytical approximations to the pricing of vanilla European options on SABR extended with mean reversion speed ? By that I mean SABR where the vol process is exp(OU). Thanks!
by woodsdevil
September 6th, 2015, 7:21 am
Forum: General Forum
Topic: Brexit ?
Replies: 7
Views: 3957

Brexit ?

Hi,What do you think is the likelihood of a Brexit really happening ? Please be objective, and I'm not interested by flame or any political manifesto...Thanks!
by woodsdevil
September 5th, 2015, 7:35 am
Forum: General Forum
Topic: Risk entropy
Replies: 1
Views: 2684

Risk entropy

<t>Hi,Is there any good technique out there to understand a trading book risks ? i.e. trying to detect bad and/or obscure risks in a trading book ? In particular, in risk-management, one always runs all sorts of single-factor scenarios, like for instance FX spot ladder where only one currency is bei...
by woodsdevil
August 30th, 2015, 8:28 am
Forum: Technical Forum
Topic: Pegged currency modelling
Replies: 2
Views: 3372

Pegged currency modelling

Yeah I saw, but it wasn't particularly useful, so I'm tempting my luck again :-)Thanks anyway.
by woodsdevil
August 30th, 2015, 8:20 am
Forum: Technical Forum
Topic: Pegged currency modelling
Replies: 2
Views: 3372

Pegged currency modelling

Hi,Does anyone have any modelling documentation or experience on pegged currency modelling ?Thanks,
by woodsdevil
August 29th, 2015, 11:28 am
Forum: Book And Research Paper Forum
Topic: Pegged currency modelling
Replies: 0
Views: 4595

Pegged currency modelling

Hi,Can anyone recommend good papers on pegged currency modelling please ?Particularly interested in versions where taking into account jump on FX vol as well as FX spot.Thanks!
by woodsdevil
March 21st, 2015, 3:26 pm
Forum: Technical Forum
Topic: best option model in the absence of existing options surface
Replies: 6
Views: 4474

best option model in the absence of existing options surface

<t>The way I would approach this is through historical hedging simulation. After all, vol is supposed to represent the cost of delta-hedging an option. So I would start by running hedging simulation pricing the option for a given ATM vol to begin with and optimise that to find the one that gives me ...
by woodsdevil
March 12th, 2015, 10:30 am
Forum: Technical Forum
Topic: Estimator of vol of vol
Replies: 4
Views: 3503

Estimator of vol of vol

Does anyone know a good statistical method to estimate the realized volatility of realized volatility in FX ?For instance, assume FX follows SABR, so what is the best way to estimate the vov using FX rates only (i.e. not using history of implied vol marks at all).Thanks.
by woodsdevil
November 1st, 2013, 8:37 am
Forum: Technical Forum
Topic: Implied Swap Rate Curve Volatilities
Replies: 7
Views: 7398

Implied Swap Rate Curve Volatilities

<t>Your question is a bit unclear: yield curve are usually fitted to spot starting swap instruments, for which there is obviously no swaption instrument to speak of (since the forward swap rates in question have fixed). In Rates, the only no-arbitrage condition one can think of is to ensure that the...
by woodsdevil
October 27th, 2013, 5:43 pm
Forum: General Forum
Topic: FX stoch vol models in industry ?
Replies: 0
Views: 6573

FX stoch vol models in industry ?

<t>In a standard 2-factor stoch vol model, the Derman-Kani expression is well known to express the non-paramteric local vol surface to calibrate to a given vol surface. It's really an extension of Dupire to stoch vol. It's well known among academics, and till recently I believed it's implemented in ...
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