A concrete example of your problem faced frequently by middle offices would be the following - you have two traded assets so they both have a historical price and return history. One asset has liquid options traded on it but the other has none. Your front office wants to trade an option on the asset...

Think of it as a cheapest to deliver option.

Alan, my work was a failed attempt at a PhD thesis at what I consider to be a then narrow minded and unprofessional department in one of Canada's universities. I had bought data from the CBOE and had positive empirical results. Anyway, rather than continue trying to reason with a brick wall, I just ...

I've only just downloaded your paper, so these are only my first thoughts. In a similar vein to Ross Recovery, you are imposing structure on utility to frame the  model. Why no mention of Ross? Or Peter Carr?  In the late 1980's I took a rather different and arguably more direct approach that impose...

Collateral exchange and central clearing are fairly effective modern mechanisms designed to reduce losses due to the failure of a counterparty. It is interesting that you did not mention them.   If your failed counterparty provided a hedge you will have to replace it with another trade from another ...

I will read your reference, but before I do I will just note a couple of things. I share your skepticism about the received wisdom that banking activities increase the money supply With one exception, when they extend credit, banks lend out other people's money - either borrowed money (deposits, deb...

SAS has functionality for this kind of stuff. E&Y has been applying it to fill in historical time series for FRTB clients.

There's a lot of real estate to fill in there. Might the correlated Brownian bridge technique be useful?

Recalling the process of signing up, wasn't the idea behind it the same idea as with all forms of social media -  to learn things about you that can be somehow exploited for money? 

Unless there is no liquidity, in which case much of theory becomes less useful, the suggestion that a market maker can only delta hedge is unrealistic. I say that as a former option trader in a number of underlyings (fixed income, equity, FX). Simulation is a good framework to investigate your own a...

I’ve seen this question before and thought it insufficiently phrased. Apart from not knowing the investment purpose and the investment horizon (a pension plan might logically operate differently than a bank trading desk), what is the regulatory capital treatment of the asker? The question is likely ...

The financial sector is typically simplistically represented in DSGE (distributed stochastic general equilibrium) macroeconomic models, sometimes as simple as plug variables that assumes perfect competition and deny the possibility of a financially induced recession. Macroeconomics as   a discipline...

Wasn't Alan Greenspan one of her many lovers? Yuck!

What do you mean by a "PnL formula for dividends"?  A rate of return over an arbitrary holding period consists of two parts - any cash income received (e.g. dividend), plus the capital gain or loss.

 ‘A science’ containing contradictions is not a science, but an intellectual mess.

Has mathematics resolved the incompleteness theorems (e.g. Godel)? That is a question rather than a statement.