Ahhh.  OK, thank you for that.  You jogged my memory from my old FE program days.  What I described was the monoline insurers like Ambac.   Can't believe I forgot.
Now the description of CRT deals make more sense.  Agency purchased mortgages which are not guaranteed.
Thank you!

I just watched a video on YouTube that said when FRMC or FNMA buy a mortgage, they implicitly guarantee the mortgage. However, it was my understanding that they do NOT guarantee the underlying collateral -- my understanding is that they guarantee the the debt: the bonds issued on the collateral. It'...

In Principles of Financial Engineering, Salih Neftci explains the difference between "on shore markets" (or local), and "Euromarkets". He writes: Onshore markets can be "organized as OTC or as formal exchanges". and The Euromarket has nothing to do with Europe or the E...

geodesic, Things get more interesting in 2D and up.  I've got one chapter in a recent book that may interest you: Ch. 5 "Stochastic Volatility as a Hidden Markov Model" in the book "Option Valuation under Stochastic Volatility II". This turns out to be kind of a mixed lattice an...

You are not asking the right question. Lattice methods are poor men's pdes.  Admittedly lattice methods played a huge rule in quantitative finance, as they brought Black-Scholes theory to ... poor men. And I am not saying they aren't being used, they are.  But beyond this, look no further, look for...

Does anyone know of books that treat advanced topics in lattice / tree techniques of solving?

The books I've seen go on endlessly on the same topics.  Binomial, trinomial, CRR.  I'm looking for an author that treats more advanced topics in this field.

Wow!   This is good stuff.  Very well written.  Thanks for linking to it!

Can someone recommend a good book on the details of implementing risk factor mapping for VaR?

Not looking for a high-level discussion.  I'd like a reference that goes into the details / techniques of an actual realistic implementation.

Ahhh. OK, that makes *perfect* sense. Thanks for the explanation!

<t>In Salih Neftci's book on stochastic calculus, on pg 130/131 he considers example 1, a generalized Brownian motion process X_t with small (independent) incremental changes distributed as:He demonstrates that X_t is not a martingale, but on pg 132 he transforms it into a martingale, by subtracting...

<t>Student here. Took a class on econometrics; now I'd like to put some of my knowledge to good use and investigate something I have a hunch on.I'd like to know the risk free rates of Italy. What is the Italian counterpart to the US Treasury bill, and where can I get these rates in some kind of usab...

<t>Excellent, thank you! I was definitely leaning in the direction of #2, although it was because I wanted a well-rounded education, not because I thought SF was going to survive (I mistakenly thought the whole field was toast). On the other hand, I really need to keep a practical head on my shoulde...

<t>Hola,I'm in an FE program and need to pick one class out of these classes:Market & Credit Risk ManagementElements of Structured FinanceLinear and Quadratic OptimizationMy background: PhD in physics, very strong in mathematics and programming. Finance itself is not really my strength, although...

I recently heard of a "slalom option". I've never heard of this type of option before. Does anyone know what it is and how it works?

<r>I want to know the things my classes don't teach me about options.Where do they come from? If I buy an option through eTrade and make $10, where did the $10 ultimately come from?I assume eTrade buys options from somebody (I'll call him "Mr. X") and sells them to me, but who is Mr. X? And if so, t...