<t>QuoteOriginally posted by: mjYou can use moment matching to ensure that the sample mean and variance are precisely what you want.Ah, yes, sorry, that is one of the possibilities I was thinking about as well . However, what makes me a bit hesitant is that you actually really adjust the stochastic ...

<t>QuoteOriginally posted by: mjIf you can manipulate the paths after drawing, map them to log space, and then add \mu t to them to get the desired final mean. You could also scale the distance from the mean to get desired variance.Sorry, I don't think I understand what you're trying to point out? <...

My results (with sigma=0.2 and T=75):Indeed 10^5 simulations already looks quite nice.

<t>Yes, I agree deltaT (or dt) is irrelevant by the scaling property of Brownian motion.Maybe I should explain a bit more that the original situation is that the paths are generated by a (closed source) third party application that basically only allows to change some parameters, so I won't be able ...

<t>Thanks Alan, I'll have a look . To reply to your edit, yes with your simplification to set interest rate constant it is just standard Black & Scholes. I'll get back to your questions in more detail when I'm back at work Monday, I can't access the data right now. What I can say already is that...

Yes, but that doesn't say a lot about E|B_t| of course. Imagine X_n taking value n with prob. 1/2 and -n with prob. 1/2, then E[X_n]=0 for all n while E|X_n| -> \infty as n \to \infty.Indeed Brownian motion is *not* uniformly integrable!

<t>Dear all,imagine a typical situation in an insurance company: a large pile of future cashfllows (all kinds of characteristics) on a long horizon (say 70 units (years)) programmed in a projection system. This system needs to be fed with paths generated by a model describing the evolution of a stoc...

It still seems to be difficult to find explicit expressions that are being used. One I came across for modelling the hazard rate p as a fct. of the stock price S is p(S) = p_0 * (S/S_0)^a for some p_0 and a < -1. Any comments to that one?

QuoteOriginally posted by: madmaxAll the ones I cited use reduced form models for credit risk.They all use finite difference schemes.There is also a paper using Monte Carlo by Lvov Yigitbasioglu and El Bachir testing the Longstaff and Schwartz method.Thanks so far for the refs

<t>QuoteOriginally posted by: nyamazaniHi,Why don't you use a first passage model (where company defaults as soon as its asset value falls below a certain level)...I know asset vaue and stock price are not the same thing but it might be worth looking into...(Do you want the deault time or the probab...

<t>Hi guys,I'm a PhD-student in financ. maths currently working on (callable) convertible bonds in a reduced form model and I'm looking for a sensible but (in my model and way of (numerically) solving) tractable way to incorporate some default risk. Since it's reduced form, I basically only model th...