<t>Quoteif you sell or write a binary call you will need to hold a delta of underlying when near the strike. you will need to fund your long stock position hence higher rate means a higher price but at the same time a higher rate means the discounting of the final payoff is higher. so the rate comes...

<t>QuoteOriginally posted by: daveangelQuote or point 1, why does the in the money binary option basically equal a zero copon bond? the payoff is known and does not vary with spot - so it has zero deltaQuote what's the relationship between delta and risk free rate the risk free comes in two places -...

thank you list, I understand what you saybesides, I find a similar thread in the forumhttp://wilmott.com/messageview.cfm?catid=4&threadid=39502

<t>thank you Alan, very detailed and clear!as you sayQuote(ii) without independent increments.X(t) is not Brownian MotionHere I give a proofassume s>t,for gaussian rv, E[XY]=E[X]E[Y] is sufficient and necessary condition of independence.so X(t) is not an independent increments process, It is not a B...

<t>QuoteOriginally posted by: daveangel1. in the money - high rates lower price. its basically a zero coupon bond2. at the money - higher rates higher price. the option delta is near max here.3. out of the money - if sufficiently far out of the money then zero otherwise its a tradeoff between the ze...

there's no constrain,maybe you can consider seperately, e.g.in the moneyat the moneyout the money

given an binary call option, fix the stock spot price, volatility, strike price, expirationif risk free rate increases, how does the value of binary call option move?

<t>QuoteOriginally posted by: listyour integral is a limit of a sum of Gaussian rv and so is a Gaussian rv for the fixed T. To define its distribution you need to know 1 and 2 moments. 1 st moment you can find by taking expectation and it leads to 0. The 2nd moment is also not difficult to find if y...

QuoteI think this link gives the results you need for the form of the resultant process:Integrals involving Brownian motionthank you ACD!that is what I really need!

what's the result of int(tau*dB(tau)) ?

how to solve this integration:\int^T_0 B_t dtwhere B_t is Brownian motion.question 2:what's its distribution?thanks!

Thank you, Traden4Alpha!your solution is very creative!

<t>QuoteOriginally posted by: outrunGreat!, good thinking of T$A..now you have at least 3 more values/constraints, the diagonal's of your covariance xx=yy=zz=1, and thus 1. a^2=12. b^2+c^2=13. d^2+e^2+f^2 = 1and the earlier4. a*d = 0.65. b*d+c*e = 0.8so .. can we solvea*b = ?a=1, b=0, c=1, d=0.6, e=...

<t>QuoteOriginally posted by: Traden4AlphaI'd double-check the problem definition. Any chance that it's supposed to correlation, not covariance? Or is their another constraint (e.g., x,y,z are standard normal random variables with variance 1)?yes, x,y,z are standard normal random variables, cov(x,y)...

<t>thank you, outrun!your solution is very inspired, accutally, the next question of this problem is 'how to simulate the correlated random variables', the common practice is Cholesky decomposition and eigenvalue decomposition.can you clarify this point more clearly?Quote You can see that "b" dosen'...