<t>HI,I'm interested in the multiplicative approach to GARCH models. I've found some useful references on the internet such as:1) Milhǿj, A. (1987). A Multiplicative Parameterization of ARCH Models, University of Copenhagen, Department of Statistics, Mimeo.2) Pantalu, S.G. (1986), “Modeling the Pers...

<t>Most of the models for interest rates ( for instance I'm using a G2++ model) admits with a positive probability negatives rates. Without chosing ontother model, how can we deal wioth this problem?Taking, for example, the absolute value of the genarted paths will not cause the loss of no-arbitrage...

<t>Hi!According to my experience (I've implemeted the LMM in my Master thesis) I used Rebonato (1999) approach which is very easy to implement. It basically gives you vectors (with arbitrarly chosen number of factors, for example 3 as in your case) you can use to distribute the instantaneous volatil...

Taking the absolute value of the negative paths will not cause the loss of no-arbitarge in the model?Regards

Yes, many thanks. I found an error in the model implementation.What is according to you the right number of simualtion required?Keep in mind mind that we also employed a variance reduction technique (antithetic variate), and in this way we have the double number of simulation.Regards

<t>I'm using the G2++ model, trying to fit the current term structure of interes rate. Accirding tio this model the choice of the enables to fit perfectly the current term structure. (see Brigo and Mercurio for example on chapter 4).What kind of errors should I expect from the model implementation?f...

<t>I have the two mean reverting SDEs in the G2++ model in the form:where both and We have also a 2X2 covarince matix obtained through Cholesky.In Matlab we have:R = mvnrnd(zeros(2,1),covariance,nstep)X=zeros(length(R(:,1)+1,1)Y=zeros(length(R(:,1)+1,1)for j=1:length(R(:,1)) X(j+1)=X(j)*exp(-a*dt)+R...

Does anyone know where to find the caplet pricing formula in the G2++ model.I couldn't find it in the Brigo and Mercurio book...Thank you in advace!Regards

<t>I really don't know how to get -1, but probably this could help you:p=0.3; % probabilityNRepl=10; % number of random variables you want to generateU=rand(NRepl,1) % generate random number from a uniform distribution on the unit interval.X=(U<p) % generate a series of logical 0 or 1 </t>

<t>I'm disperately in search of historical prices of option with standard maturity (let's say one year) on Microsoft and on Vodafone.I need prices of put and call contracts with relative strikes for basically calibrating a jump diffusion model. I can have access on bloomberg but the bloomberg help w...

<t>Assume a multicurrency framework with two markets, one domestic and one foreign. In each market we have a risky asset (stock), and forward Libor rates (for different maturities). We obviously also have an exchange rate connecting the prices of assets between the two economies. I imposed no-arbitr...

<t>I have implemented a very basic Libor Market Model in Matlab (as unfortunately I don't know very well C++) using an Euler scheme discretization. Results are not bad, both tests on ZCB and caplet prices have matched almodt accuartely market quotes.As far as I have understood, the choice of a time-...

<t>To be more precise, I have implemented in matlab the Libor market model fro simulating forward Libors with standard tenor (6 months) resetting on fixed dates in the future.To perform the simualtion I used an Euler sheme applyed to the log of the forward rates... what I have to choose is the numbe...

<t>Could someone explain me how to properly define the intensity of jump size in the Merton jumo diffusion model?I mean, the intensity should be the mean number of arrival of jumps in a time intetval. What are typical values for this intensity? If in the calibration I got a jump intensity of 4, it m...

<t>Applying a standard Euler sheme on the logarithm of the asset (or interest rate) we want to evolve in a Monte Carlo simulation procedure, what happend to the bias and to the estimate standard error if we take extra time step in the discretization?I know what is the standard error of the estimates...