- November 15th, 2011, 11:20 pm
- Forum: Student Forum
- Topic: existence of moments
- Replies:
**2** - Views:
**15641**

<t>QuoteOriginally posted by: ColdKing If E[|X|^k] exists, then E[|X|^m], for all m<k exists.Have learnt the proof of this statement long before. Now forget how to prove it. Does anybody still remember or which book/web reference has this proof? Thanks!You need to check that, for any 1<=n<k, To do t...

- November 15th, 2011, 8:36 pm
- Forum: Student Forum
- Topic: swaptions
- Replies:
**17** - Views:
**17496**

<t>QuoteOriginally posted by: Bazman2 Therefore as in the original post if the 1y*1y is trading at 25% and the 1y*2y is trading at 20% you can work out what the 1 year 2 year forward vol should be?Vol(1y2yf)^2=((vol(1y1y)^2*1)-(vol(1y2y)^2*2))/(1)Actually it'd be Vol(1y2yf)^2=(-(vol(1y1y)^2*1)+(vol(...

- November 14th, 2011, 11:00 pm
- Forum: Student Forum
- Topic: are there bounds on vega?
- Replies:
**2** - Views:
**15804**

Wrt BS vega, correct me if I´m wrong, I´d write:

- October 31st, 2011, 11:28 pm
- Forum: Technical Forum
- Topic: Bootstrapping OIS, Fed Funds Curve
- Replies:
**3** - Views:
**20268**

Assume the flat (i.e., no spread), floating leg is worth par.

- October 31st, 2011, 11:24 pm
- Forum: Student Forum
- Topic: Martingale equality
- Replies:
**5** - Views:
**16424**

You are missing an E:

- August 29th, 2011, 3:37 pm
- Forum: Technical Forum
- Topic: Modeling Spot Exchange Rate with Stochastic Interest Rates
- Replies:
**22** - Views:
**24111**

<t>QuoteOriginally posted by: list I think that for example equation d S(t) = (rd (t) - rf(t)) S(t) dt + sigma (rd (t) - rf(t)) S(t) dW(t)looks more analytically realistic thand S(t) = (rd (t) - rf(t)) S(t) dt + sigma S(t) dW(t) ( 1 )This means that the exchange rate between 2 currencies with simila...

- August 26th, 2011, 11:13 pm
- Forum: Student Forum
- Topic: caplet as bond put
- Replies:
**15** - Views:
**19920**

You cannot use Black's formula to price an option on a zero coupon bond, as the underlying (the price of a zero coupon bond) is not lognormal (because the forward rate is).

- August 23rd, 2011, 10:34 pm
- Forum: Numerical Methods Forum
- Topic: Pricing this 7.5 year swap - True newbie :(
- Replies:
**4** - Views:
**20559**

<t>Do you mean the swap rate for an IRS starting today, maturity 10/11/20 ? If the curve is as of today, and the swap rates have the same conditions (day count convention, frequency of payments, ...) as the one you want to price, I'd interpolate the maturity date in the mkt swap curve, as it lies be...

- August 23rd, 2011, 9:18 pm
- Forum: Student Forum
- Topic: Quanto plain vanilla formula for FX rate
- Replies:
**7** - Views:
**19461**

<t>I still have doubts about whether correlation should be 1 or -1.I obtain that the quanto adjustment to the drift of the exchange rate USDperEUR is -1 x sigma x sigma, where sigma means the annualised vol of returns of the exchange rate. A change of measure adds the term rho x sigma(underlying) x ...

- August 23rd, 2011, 8:24 pm
- Forum: General Forum
- Topic: ho lee monte carlo?
- Replies:
**4** - Views:
**20391**

<t>QuoteOriginally posted by: nealsmith but when I generate, say, 1000 paths, and then find the mean of a simple ATM caplet payoff L*dt*(r_{t_k}-K) I'm off by a factor of 100 from the BS price.Try generating more paths. Double check that there are no constants missing, that you discount the payoff, ...

- July 14th, 2011, 7:03 pm
- Forum: General Forum
- Topic: FRA
- Replies:
**7** - Views:
**19316**

<t>Many (most?) books still neglect the multi-curve paradigme (one curve for disc., as many curves as different tenors for forwarding) and they simply use "LIBOR". Reality is more complex - there are many other inter-bank offer rates, presence/absence of collateral, ... The OIS curve is assumed to b...

- June 23rd, 2011, 9:30 pm
- Forum: Student Forum
- Topic: How to argue that a self financing hedging strategy is a martingale?
- Replies:
**4** - Views:
**18769**

<t>QuoteOriginally posted by: cedicon the self-financing hedging strategy is a martingale? ...I'd say "the discounted value of a self-financing portfolio is a martingale under the risk-neutral probability." The change to the Risk-neutral measure makes the drift equal to r. Discounting (play around w...

- June 23rd, 2011, 9:13 pm
- Forum: General Forum
- Topic: wiener process/brownian motion
- Replies:
**24** - Views:
**69257**

It is right - except for a couple of missing E's. Fubini allows you to change the order of E (actually, an integral) and the explicit integral. Remember that the odd moments of a zero-mean normal distribution are equal to 0.

- March 23rd, 2011, 6:22 pm
- Forum: Technical Forum
- Topic: very high forwards in LMM
- Replies:
**12** - Views:
**21759**

30,000? It looks like there may be something wrong - compute the mean and variance of the resulting forwards and check whether it makes sense or not.

- March 21st, 2011, 8:39 pm
- Forum: Technical Forum
- Topic: Appropriate measure?
- Replies:
**3** - Views:
**20772**

Numeraires are required to not make payments during their life.

GZIP: On