No problem. I found out what I was doing wrong. Problem resolved.

<t>HW start with the continous-time version of r as:dr = -a*r*dt + vol*dWwhere dW~N(0,dt)In footnote 5 of their paper they state the variance, V, of discrete changes in r, ie. Var[r(T)-r(t)] as:V = vol^2 * (1 - exp[-2*a*(T-t)] / (2*a)I've tried several times but I cannot see how they get this.I keep...

If a fund has an EUR base currency but invests in a fund whose base currency is USD and then hedges its investment with sell USD/buy EUR FX forward, should I include this FX forward trade in my Gross Exposure calculation?

<t>I'm trying to understand the Black76 model for pricing swaptions and I have a question I was hoping someone could answer.How do I determine the (constant) volatility of the forward swap rate?I know that these are often quoted by brokers (eg. on Bloomberg, et. al.) for liquid currencies but if I h...

<t>Thanks. Could you please clarify one of your remarks on Gross Delta?When I 'sum up the absolute deltas without netting' are you saying I don't make any attempt to aggregate positions by each Futures contract (Sep10, Dec10, Mar11, etc.) first, before summing? In other words, before summing, do I t...

<t>I've been doing my head in over what the above are (a) supposed to represent, and (b) how to calculate them.I have a portfolio consisting of Commodity Futures and Options on those Futures.I think I understand the calculation for the Options: 1. calculate Option Dollar Delta = Current Price of Und...

<t>Excel is rubbish for large data sets and rubbish as a calculation engine. You are better off using a database for the former and something like C, C++ or C# for the latter.MS continues to support Access because its has legacy users (just like VBA) but with MS SQL Server Express Edition being free...

<t>The yields are par yields (follow the 'Treasury Yield Curve Methodology' link on the same web page you posted).If you read that page you'll see they are not actually yields on traded securities but are, instead, yields determined from cubic splines based on traded securities.btw, if you have acce...

<t>I think I finally understand this one.Conditional on:1. Monty always opening one of the remaining 2 doors; 2. of those two doors he always opens one which is hiding a goat; and3. he always gives the contestant the opportunity to re-take his choicethen which door the contestant chooses first is, f...

I'm having difficulty coding the abovecaptioned monte carlo method for American options. In particular, the weighting scheme. Does anyone have any example code I could look at? Or can they explain to me how to code the weights for a multivariate lognormal process? Kind regards.

<t>jawabean,My (psuedo-)random numbers are just Excel's RND() function which, I believe, is a uniform distribution.I then map them on to two separate (almost normal) CDFs of Unit Sales figures (one for Console Games, the other for Handheld Games). I believe these resulting Unit Sales figures are '(a...

<t>IIRC you need to set up the hedge portfolio P(C,X,S,t) = P = C - aX - bS where a and b are the hedge ratios.Use Ito's Lemma to find dP in terms of dt, dC, dX and dS and then substitute in the dX and dS terms and the dC term [using Ito's Lemma on dC(X,S,t)] to get dP in terms of dt, dW(x) and dW(s...

<t>I have independently generated two (pseudo-)random numbers in Excel.I have then applied these to the CDFs to get two random values (eg. Unit Sales) R = [614,037 66,735].These two random variables have an historical correlation of 0.68, ie. Choleky Decomp (C=LL') gives:L = [1.00 0.00 0.68 0.73]Whe...

Thanks again. I think I will have to code some VBA.

Thank you. Do you know if there is a function in Microsoft Excel that does this or do I have to resort to VBA code to do it?