<t>QuoteOriginally posted by: scholar[...] I don't see how default correlation is modelled there. My understanding is that it is a model for non-interacting defaults. Not clear in what sense this can be viewed as a truly dynamic model of any sort rather then just a intrerpolation-type model useful o...

<r>Will not any distribution with 35% vol confined to [0,1] be multimodal? The std uniform vol is around 29%. And is multi-modality necessarily unrealistic in the tail? A realistic model would assign finite point mass at zero and unity; these guys argue that fitted beta distributions are bound to be...

<t>Thank you very much for your kindness and your patience, StructCred.I had not realized how standardized index tranches are - that mapping from an old off the run series is the only situation requiring maturity interpolation.I still don't follow where 40 pay dates come from. 5 x 4 = 20, and while ...

<t>I hope my questions are not silly or naive; this is not my area.First, regarding the grid of loss distributions described by Stylz, why are there 40 pay dates for a 5Y deal? I had supposed that these were commonly quarterly pay.Second, is this also how you would mark off-market deals? I mean, the...

<t>QuoteOriginally posted by: ppauperif the interest rate is constant and non-zero, the price of the option is the current price of the stock:in your case, 60.[static hedge explained]That won't work with non-zero interest rates because it gives only a 1-way hedge - only an upper bound. If you hedged...

<t>Quote1 minute work every month? Lepperbe,With due repect to bismarx, I doubt that "rolling" is really the problem. I know of buy-side people that were interested in buying volatility when the Vix hit single digits but were put off by the negative theta - and consequent daily settled negative carr...

<t>I'm not sure whether your question is incredibly subtle or incredibly basic. Assuming the latter, perhaps you should start by explaining what arbitrage you are thinking of, and how you propose to imply a no-arbitrage price from blended coupon yields. Interpolation of a (say) par yield curve will ...