<t>LOL! good one, thanks! QuoteOriginally posted by: OrbitthisHa ha, not trying to be a smartass, just love using that "let me google that for you" thing which I think is funny.Anyways I'm no credit expert, believe me. However people have tried to draw information from the vol skew in order to get c...

Assuming there are no CDS contracts issued for the underlying bond; how can you calculate, or what instruments do you use to calculate, risk-neutral survival/default probabilities of en entity?

Here is a dumb question: Let's say I'm simulating a CIR process using an approximation scheme. How do I test and validate that the process that I simulated is indeed a CIR process?

Dumb question... I have near-zero values (and even negative) in my time-series (of yields for example). Is there an easy way to stabilize the calculations to avoid division by zero or a small number, w/o impacting the volatility/variance of the time-series?

you will most likely have to come up with *much much* more than 4% of your notional if you are selling protection, depending on what else you have in your cleared portfolio...

I was asking a simple question: Why do "WE" use simple or absolute returns (i.e. bps changes) of rates, instead of their log-returns, when calculating historical VaR for bonds, besides the fact that rates can be negative? QuoteOriginally posted by: bearishWho are "we" and what do you mean?

Why do we use simple return--of yield to maturities--instead of log-returns?

<t>I'm guessing if you have the contract price P, fair spread S, contractual spread K, and the RPV01 available, for a protection buyer, you would haveS*RPV01 - (1-R)*ProtectionLeg = 0whereasP = (S-K) * RPV01which would mean dP/dR = ProtectionLeg if you are short protection, and dP/dR = -ProtectionLe...

Is there a common approach to find/approximate CDS sensitivity wrt to LGD or recovery rate without bumping RR up and own?

Is there any distribution-free (i.e. non-parametric) ways to estimate GARCH parameters? Let's say GARCH(1,1).

QuoteOriginally posted by: paulptliDo you realize, that matrices there are NOT necessarily positive definite, and the fact that limiting distribution is sometimes drawn on [0,1] is just normalization?Can you rephrase this?

QuoteOriginally posted by: AlanPerhaps the problem of determining the closest positive definite matrix to a given matrix is already solved?See, for example the discussion hereThat's only one approach, and a very time consuming approach.

Perhaps by determining a cutoff point for the eigenvalues by somehow finding where the noise starts?

Is there a way to utilize Wigner's semicircle law to approximate non-positive-definite (NPD) matrices with closest positive-definite (PD) ones? In other words, is there a sensible way to set the nonpositive eigenvalues of a NPD matrix to positive ones using random matrix theory?

<t>QuoteOriginally posted by: pcaspersQuoteOriginally posted by: almostcutmyhairQuoteOriginally posted by: pcaspers1) / 3) today's discount factors / survival probabilities are decreasing in maturity <=> instantaneous forward / hazard rates are positive at all timesSo, a convex discount factor/survi...