Thanks all for the sharing.  But let 's say we are not talking about an option market maker who could come up with their own model to indicate their price.  I asked an option trader how they typically calculate their price from quoted IV in that case.  They told me that they simply use BS formula wi...

Hi, Suppose that an equity underlying has liquid market quotes of vanilla option IVs and projected cash dividends.  In such cases, what is the market convention/formula used to convert the quoted IV into price?  Is it still using BS formula with the quoted IV and a forward price adjusted for the pro...

I understand these examples work. But wonder if there is any more systematic approach to generate a larger and more flexible class of such matrices, so that I can extract some of them with a structure that makes sense for for application.

Hi

For a particular finance problem I am working on, I need to construct an invertible positive n-by-n matrix where positive means all matrix entries are positive.

Can any of you suggest a general approach to construct such matrices?

Hi, I want to test a IV model I recently established.   The model aims to overcome one difficulty diffusion based models typically have in fitting market that exhibit steep short term skews.  It will be greatly appreciated if someone can send me such a sample data set for my testing purposes, if tha...

<t>Hi, I took a look at Miron and Swannell's approach (it is a surprisingly expensive book!). Their approach relies on quite specialized assumptions.1. It requires one to first interpolate input swap rates to obtain all missing swap rates between curve pillars, e.g. by a simple linear interpolation ...

<t>Hi All,Industry practices typically apply the bump-and-revalue approach to obtain curve sensitivities for instruments. The bumping can be applied to either market quotes or zero rates/forward rates. In the latter case, Jacobian manipulation is required to transformed the risks back to the risks w...

<t>Hi, Hagan makes the following remark on his paper "Interpolation methods for yield curve construction":"One approach now advocated in some sources is to interpolate (linearly, say) theinput swap rates to the expiries which are not quoted, and then proceed with acomplete information set. However, ...

<t>I guess I got the answer. Basically both are subject to the same set of constraints. But it is up to one to take which are the unknowns, either first or second derivatives at the knots. The two different choices will give you a different system of equations obviously while solving for the same sp...

<t>Hi,I wonder if any of you can help me on the setup of the tridiagonal system in the cubic interpolation in Quantlib *under the choice 'Spline' for derivative approximation). The tridiagonal system looks a bit different from the one suggested in the literature. In particular, the middle elements o...

<t>HI,I wonder if any of you has experience in implementing time dependent Hull WHite model via a binomial tree which can full fill:1. Perfect fit initial curve2. multiple coterminal swaption prices (say, 1-into-14, 2-into-13, ... 5-into-20 etc) generated from the Hull White model (say, you have had...

<t>Tradermaster,I recommend you to make cases (concrete ones) if you firmly believe BGM or Cheyette or HW2F do not merit any practical uses at all. When some models are popular among practioners for a long while, it doesnt mean they are the best. But it would certainly mean they are likely to have s...

<t>Hi,I wonder if any of you has experience in implementing the Quasi-Guassian model with linear local vol as explained in Piterbarg and Andersen 's book (Volume 2). I did the implementation and observe that the factor process and discount factors blow up especially when maturity is long and discret...

<t>I suppose you meant to say Cheyette model resemble Gaussian short rate model. Precisely, Gaussian short rate models are special cases of Cheyette model. Cheyette can go beyond by specifying non-deterministic volatilities so as to capture smiles.Now regarding your comment on stability of HW2F, it ...

<t>Regarding the Cheyette model introduced in Andreasen 2005 ("Back to the Future"), I have the following question.The authors reverse engineer the volatility parameters of the Cheyette model factors to match the prescribed dynamics of a selected set of so calledbenchmark rolling forward rates (inst...