<t>Anyone had any success with this model? The proposed dynamics are as follows:I implemented a FDM solver for these dynamics but it seems that when I try to price with monte carlo to validate the prices do not agree for certain parameter sets (european put options). Particularly when I turn on the ...

<r>By the way, I just found an excellent paper by Carr and Wu if anyone else has the same questions I did. <URL url="http://econwpa.wustl.edu/eps/fin/papers/0409/0409014.pdf"><LINK_TEXT text="http://econwpa.wustl.edu/eps/fin/papers ... 409014.pdf">http://econwpa.wustl.edu/eps/fin/papers/0409/0409014...

Enough said.Thanks fig.

<t>I am trying to get a feel for how the street prices exotic currency options (both long and short term). Do exchange rates exhibit similar properties that equites do, i.e. discrete jumps, skew, smile, etc... Say I was to price a 2 year cliquet on the fx rate, do I need stochastic volatility and or...

I need to implement something of this nature and I am trying to decide which modelling framework I should use. Has anyone developed something similar? I am thinking about LMM but I want to make sure I am going in the right direction.Thanks in advance,-a

<r>I need two papers for a high-dimensional Sobol RNG implementation and QMC simulation I am writing, actually translating, into MatLab code from C++ (Quantlib implementation), but I am short two papers.If anyone has these papers it would be extremely helpful if you could send them to me. "Algorithm...

<t>Svetlana and Alan, thanks for your input. I have come across a paper by Christopher Jones in which he studies the dynamics of the general volatility model, dV = k(b - V)dt + c (V^g) dB(t). I discretized and calibrated this process to my data set, and the values returned were interesting. I got a ...

<t>This may seem silly, but I need to price S&P index derivatives with maturities that range from 5-17 years and I want to use stochastic volatility. I tried to use the Heston model, but the parameters that come out of my calibration cause the volatility process to hit zero too much and introduc...

<t>Yes, I am using a simple 1 factor Hull-white dynamics for the moment. I think the problem was with the volatility I was using. It seems that I was using lower volatility than was actually occuring (i forgot to bootstrap to get the forward vol). Now my price is coming in at mid-market like I would...

I would have to say that it depends more on the shape at a single point in time.

<t>I am pricing a highly specialized lookback option so the vega is very high. I tried applying a cubic spline to the vols and rates but that actually reduced the price slightly. When I use stochastic vol, I get prices closer to the dealer's quotes, but I have reason to believe that they are not usi...

<t>Say that I have a continuous forward rate for each year from 1 to 10 years and I am running a monte carlo simulation to price an exotic (simple bs-dynamics). If I generate more than 1 timestep per year, will this effect my price because I am implicitly assuming that the continuous forward rate is...

<t>Good to know others have traveled the path. I love the work I am doing now but exactly as you say, I do not want to become an actuary. This was my biggest 'pigeonholing' concern on the onset, but my firm has been very cooperative with the fact that I do not want to have anything to do with the ac...

<t>My firm mostly uses Monte Carlo methods because of the highly path dependent nature of the products we hedge. I have used various equity and fixed income models with this method. However, I am currently working on a 2 factor FD solver to value a Mortgage Servicing portfolio. First cut will be in ...

<t>Hi all,I finished my masters in FM from U of C last June and I have taken a job with a consulting firm. My firm provides consulting to insurance companies, who wish to hedge their risky life insurance guarantees (which behave like exotic derivatives). Technically I have a research role, I am in t...