I also have a very basic question. When constructing a short-rate binomial lattice, many books "assume" the risk-neutral probability is 0.5. I haven't been able to find justification for the assumption of this value. Can anyone clarify the justification for this assumption?

<t>QuoteOriginally posted by: manolomQuoteOriginally posted by: ezbentley I must be wrong since every single textbook says dG/dt = 0. Any help on the intuition is appreciated!S is not a function of time; S is a stochastic process -that is, a collection of random variables {S_t}_t. For each t>=0, you...

<t>Here G(x,t) = ln(x). Then dG/dt = 0. But we know that x is a function of t, x = f(t). So if we simply substitute G(x,t) = ln(x) = ln(f(t)) = G(f(t), t), then G becomes a function of t. I am having trouble convincing myself that the dependence on t somehow vanishes when you define an intermediate ...

<r>Well, I am following the example from MATLAB GARCH(1, 1) forecasting:<URL url="http://www.mathworks.com/access/helpdesk/help/toolbox/econ/f3-80036.html#f3-81184Towards"><LINK_TEXT text="http://www.mathworks.com/access/helpdes ... 184Towards">http://www.mathworks.com/access/helpdesk/help/toolbox/e...

<t>Right now I am using MATLAB garchfit and garchpred to build a GARCH(1, 1) model to forecast volatility over the next k periods. How can I calculate the confidence intervals of the forecasts? I searched through several textbooks and papers but didn't find a clear answer. One paper mentioned someth...

Is the CQF a credential employers will look at seriously?Also CQF credits are not transferable if i decide to pursue a degree later on.

<t>I am looking for schools that offer courses on quantitative finance online on a "for-credit" basis(not just seminars or MIT opencourse). I would like to take courses for credit in case I decide to pursue a degree(MFE or similar) later on. So far I have found that Stanford(SCPD) and Columbia(CVN) ...

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<t>Both NYU and CMU offer courses on Statistical Arbitrage and they seem to cover actual trading strategies. Does anyone have any experience with those courses? Do they really teach strategies that are similar to what the quant hedge funds use? I am curious to know what strategies they cover and how...

Hi Moti,This might be a dumb question, but what sub-branch of electrical engineering was your focus? How is an EE background relevant for a quant job in a fixed income HF? Just curious.

<t>In the book Quantitative Trading Strategies, Lars Kestner mentioned that the optimal leverage for a trading strategy is equal to the mean of return divided by the variance of return. This seems to be a result of Harry Markowitz's modern portfolio theory. Can anyone help me understand the concept ...