EDIT: originally posted empty.

I make it 5.187377518

<t>QuoteOriginally posted by: AlphaNumericusQuoteOriginally posted by: iadams...name B at 9900 bps (since everyone expects it to default any day now). let's asume that ... B defaults next week. A protection buyer ... will be paying ... 9900 bps for B for one payment period (say 6 months).No, I belie...

<t>There's certainly a factor you need to take into account for expected maturity variations. Consider a simple (but extreme) two-name (50:50) 5 year index. Name A is currently trading at 100 bps, name B at 9900 bps (since everyone expects it to default any day now). let's asume that A does not defa...

Have you looked at ABSs for consumer loans and credit card receivables?

<t>QuoteOriginally posted by: fashionmarinaso why delta (dV/dS) is the hedging ratio?Your are holding V(S,t) + qS + C, where C is your current cash balance. Over small time interval dt, S changes to S+dS, and V changes to V(S+dS, t+dt), while qS changes to q(S+dS) and C changes to C(1+rdt). This is ...

Money is not wealth.

<t>When a credit event occurs for a name in a synthetic CDO, the loss is taken by the most junior tranche still active, and the recovery gets assigned to the most senior tranche. Thus the points at which you'd have to place the attachment/detachment points for your NTD proxy tranche are determined b...

Your game rules are not clear, but it sounds like a simplification of blackjack with card counting. Kelly criterion looks like what you're looking for.

<t>QuoteOriginally posted by: fashionmarinato understand european option BS delta hedging is trivialnow if i want to replicate an american option with a self financing portfolio of underlying and cash, is correct drives the portfolio simply by the delta (that i can compute ie by binomial)? and if it...

<t>QuoteOriginally posted by: spacemonkeyNo, your portfolio is not self-financing in either the European or the American case. For your portfolio to be self-financing, you have to hold some bonds. iadams repeats a common justification for a common derivation of the pricing PDE. Both the derivation a...

<t>The portfolio is self-financing if delta V(S) = - delta qS over any small time interval delta t, i.e. your protfolio value doesn't change. Slightly more strictly, the delta (V(S) + qS) = r delta t, since you should accumulate value at the risk-free rate. After this time interval you must rebalanc...

Try here. You'll find reference to the Normal function about 2/3 down the page, but read the top section explaining the concept first.The PDF is very large across a very small width, resulting in a constant integration result of 1. Remember that this is a continuous function.

<t>QuoteOriginally posted by: phenomenologistJust check the "hyperboloid" link.I did, and it said "A hyperboloid of one sheet is also obtained as the envelope of a cube rotated about a space diagonal (Steinhaus 1999, pp. 171-172)." This is like saying that a cone is the envelope of a line rotated ab...

No: it's an integral not a sum.As sigma tends to 0, the PDF becomes narrower and taller in the middle, but its integral over the Real domain remains at 1, and the PDF becomes a Dirac delta function.