Could anyone educate me on how to hedge margin? Thanks.

Let us denote a kalman filter system by the following equations.$w_k$ and $u_k$ can not be correlated. Why the covariance matrix of the observation white noise U is usually forced to be diagonal? Any help will be appreciated.Jay

For k dimensional problem, the momentum generation function can be given by hence, we can have the E(n) and E(n^2).

<t>I work for insurance company,too. So I am in the same boat. Any projections more than 1000 scenarios are practically impossible. So far, we have not found an easy solution to force E[S(t)*discount factor(t)] to converge to S(0) quickly. Afth, what will you use the model for? Pricing or valuation?...

<t>I have a 25-year American put option on a portfolio that is composed of a few equities and money market. I model interest rates by CIR. I am thinking about modeling equities by lognormal model; but instead of using deterministic risk free rates, I will use the stochastic short rates from CIR. ie....