<t>Dear Manolom,Good to hear that the two different rates cannot just be connected, due to different ways of calculating the rates: simple versus compound. I didn’t realize that. Agree this is not a problem for the t2<12 months case as we only have true Euribor quotes (for convenience I call the Eur...

<t>Suppose we want to find a reasonable approximation for the interest rate for a period of x months starting somewhere in the future (say period [t1,t2]) based on Euribor. My plan was the following:1) Use Bloomberg to download Euribor quotes for months (eg via EUR012M Index) and European swap quote...

<t>Valerie,The key question to me is why you know you are in a separate regime. Ofcourse looking ahead in the simulation you know what is going to happen. Is there maybe an outside variable indicating whether the probability to be in the up-regime? If that is not the case, I would not estimate a sep...

<t>Valerie,The surprise to me was that for the American option it is not very far off if you take out the OLS and replace it by the maximum possible payoff (or dirty MC). A test on American options has been published by Chen Shen - computational complexity analysis of least squares monte carlo for p...

<r>Reading this thread I remember seeing another method last year. The paper of Grubisic and Pietersz discusses a new method and compares, among others, to Higham and Rebonato. I have not tried it out myself, but it looked nice.You can find the paper at <URL url="http://www.math.uu.nl/people/grubisi...

<r>calculator,I'm currently reading "Term Structure Models: a Review" by Rebonato which discusses how many different IR models are related and discusses (dis)advantages of them. It doesn't tell you how to price exactly the different products you speak about but try it outYou can download it from his...

<r>Thanks people for all the comments. The solution is getting closer!For integral c the problem seems ok and Maple shows you some answers without too much hesitation. For your info here is c=1: 1/2*a/b*2^(1/2)*(-1/2*Pi*sqrt(b)*sqrt(2)*exp(1/2*b)*erf(1/2*sqrt(2)*sqrt(b))+1/2*Pi*sqrt(2)*sqrt(b)*exp(1...

<t>Thanks for the reference Nonius. Indeed his work seems worth reading. Started to look at his course notes which opened an eye without any eureka yet. Interesting enough to see his working place: I was in Sophia Antipolis just a few weeks ago... Anyway, my goal is to have an accurate answer reason...

<t>Hello!Currently I am looking into the following integral int_{-infinity}^{infinity} exp{-s^2/2} [ (a*b + s^2)/(a+s^2) ] ^{c} dswhere a and b are positive constants and c is a positive fraction. As long as c is a positive integer I can get to an analytic expression for this integral with a bunch o...

Why not try Eric Weisstein at World of Mathematicsallu

<t>Hello! I investigated the applications of MRJD models to pricing electricity derivatives in my Master thesis. Hope putting this on the web will generate exchanges of ideas. I worked on this topic with GogolaAnita (who was my supervisor for this project). We estimated the parameters of the MRJD mo...

<t>Thanks Aaron for your explanation. So far we have applied VAR not to options, which is something we are looking into nowadays. I agree that, as you suggested, keeping market factors down is the way to go if we don't want to estimate huge amounts of numbers. I believe the delta-gamma method is app...

<t>Hello,It seems an ok deal to capture option risk by a Delta / Gamma approach for a single option. Now I am busy to extend this to several options. My trouble starts if I should find the risk of correlated options on different maturities. What kind of riskmeasure (e.g. VAR) should I use for this? ...

<t>newton, Indeed the way to proceed towards a regime switching model with stochastic jumps seems possible with the work of Chacko & Viceira. Our reason to start with a jump diffusion model was to arrive finally at the stochastic regime jump.>> I also think I can get around the problem you had w...