Very interested in GOP and the benchmark approach in general: if you have anything you would share i'd be interested in thoughts/ideas/...Srioae

Similarly interested!

1. stop using emacs. Kate, Kdevelop, anything but emacs.2. as you get better at latex you'll stop needing to see the pdf every 2 minutes. so don't worry about that. Create a makefile for latex and bibtex and opening .dvi or pdf, a quick google will give you plenty of examples.3. eps

OK I see, and then where there is the special case A(t)=0 the two could be similar (thinking say arithmetic Brownian motion).Thanks,

<t>Hi there,sorry if I'm being daft but I've got a question. Say we've got a SDE in differential formI should really write thisNow if the vol is deterministic I can also write this vol as D(t). Let as then I can also write the solution as How is one the solution and one the correct way of writeing t...

<t>I wouldn't read anything by Taleb. The man is a one-trick donkey who has never suggested anything particularly useful.If you're interested in non-Gaussian returns there is a book 'option pricing under non-gaussian distributions' (or something similar) by Poon. Quite a nice book. Quantitative Risk...

<t>I've not got time to look at this at the moment but I've looked at this in the past and a few points I'd make:1. for very short dt you are likely to get numerical overflow/underflow in the CIR pdf (and in the bessel function). THis I'd say watch out for. Look at Abramowitz & stegun's approxim...

<t>You think you understand something and then it bites you.Market price of risk in interest rates is (for most times) negative. This results in real world prices which are higher than risk neutral. If this is the case won't yields be lower in under real world pricing? (and higher in risk neutral?) ...

<t>well you put in your solution to the original PDE and get a quadratic in gamma. This has two possible solutions.1) gamma =0. This is always possible2) gamma =1-(2\alpha\mu)/(\sigma*\sigma) This is possible when 2\alpha\mu/(\sigma*\sigma) <1.To ensure only one solution is ever possible require gam...

<t>I've tried to calculate the Delta for a bond option in a CIR framework. Suspect it isn't possible, or there is a possible series solution approximation (the spot rate forms part of the argument to the modified Bessel function and there appears to be no analytic derivative to this special function...

no but really couldn't you just simulate the underlying that will give you the potential cash flows. the value at the end is your cash flow...?

just did it for you the next month is 400....

<t>Thanks, for your help mjyI think I'm there (A fun Sunday!). I think my problem was a) being very reluctant to want to use Ito on L_t it looked messy andb) not always understanding mgales deeply enough.In the end I went for the argument \frac{P(t,T)}{B(t)} is a martingale under Q^T and worked out ...

<t>What I am trying to clear up is the steps taken by Jamshidian (An Exact Bond Option Formula) and later the pioneering market model papers about the forward measure approach. 1. The decision is made that the T-expiry bond is a good numeraire for T-expiry contingent claims. Yep.2. Have a risk-neutr...

Apologies if it wasn't clear enough. The R-N deriv iswhere Q is risk-neutal and Q^T is forward, B(t) is the cash account. P(t,T) is bond. What mathematical steps do I take to find the Girsanov transform? Thanks for your help