<t>QuoteOriginally posted by: daveangelQuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: katastrofaWhy this and not p2/p1 - 1? I usually respond with "because log-returns are additive", but why should a non-mathematician care?There's a few of "intuitive" ways to look at it:1. Log ret...

please explain the inconsistency

as has been mentioned, black scholes implied vol is just a way of expressing option prices. You can fit your heston model to the prices or to the implied vols. If you match prices you match vols. They're equivalent.

Your question doesn't mean much if you're talking about uncorrelated series, as dimension reduction is not possible.

Yeah it's just to (attempt to) strip out the drift/time inhomogeneityOtherwise my first component does really tell me anything interesting

<r>Sorry, I suppose I meant beta not binomial. See here for more info - <URL url="http://www.vosesoftware.com/ModelRiskHelp/index.htm#Monte_Carlo_simulation/How_many_iterations_to_run.htm"><LINK_TEXT text="http://www.vosesoftware.com/ModelRiskHe ... to_run.htm">http://www.vosesoftware.com/ModelRiskH...

you could consider a binomial distribution to you a confidence interval - note that for the x^th percentile, there's an x% change that each sim falls above/below it...

well, i'm not overly surprised if the one factor model doesn't give a good fit at both long terms and the short end...

I have reported this thread to HMRC.

<t>Normally I use method 1 with a large amount of expert judgement regarding the subset of the universe of bonds used to do the fitting, and the Smith-Wilson algorithm to fit a continuous curve.But it depends on your aim - approach 2 is good if it is advantageous to you to represent the yield curve ...

Thanks!

<t>This seems like it should be very easy, but my mind is temporarily drawing a blank...I have some code that in its basic form chooses m (unique) items out of a collection of n items, following the algorithm described in pseudocode below.This algorithm seems very inefficient though, particularly wh...

well, do you have an expression for the short rate? The bond price is generally calculated as the inverse of the exponent of the short rate integrated over the borrowing period (from this derivation the price is obviously positive)

<t>Oh, I think I see.In models that allow for it, the IYC information will be contained in the variable usually called theta? And in those that don't, like Vasicek, they just don't do anything about this - so really we'd only use this type of model when we're interested ONLY the short rate (say if w...

<t>Hello,I understand an intial yield curve implicitly gives future short rates.Furthermore I understand the existence of short rate models, such as, say, Hull White.However, I am not quite clear on how the two are combined to produce a projected future yield curve.i.e., Let us suppose we have the t...