Since the seat you are sitting in will never be removed, the probability does not change. The answer is 1/1000.

<t>QuoteOriginally posted by: BerndSchmitzthanks! just to get this straightI calculateabs(mean(model1)-mean(model2)) - 2.576 * sqrt(variance(model1)+variane(model2))and if the values is larger than 0 then the models produce prices that are significantly different from each other at the 99% confidenc...

<t>QuoteOriginally posted by: BerndSchmitzhey,I calculated some exotic option prices based on either a Heston-Stochastic-Volatility, Merton-Jump-Diffusion or Bates model by means of Monte Carlo simulation. Now I want to say something about whether the obtained prices are significantly different from...

Drift is the expected return.

<t>There's no rule that says the term structure of volatility has to be increasing or decreasing, although the total variance must be nondecreasing. The skew tends to flatten out as you go to longer maturities, so in general, the vol term structure will be decreasing for lower strikes and increasing...

A covariance matrix must be positive-semidefinite and symmetric. In addition, a correlation matrix will only have values with absolute value <= 1 and 1's on the diagonal.

<t>QuoteOriginally posted by: wileyswok let me try again: there are n balls weighing respectively, 1, 2,..., n grams with their labels possibly misplaced. you, who have the complete info, need to perform couple of weighings on a balance so that your intelligent friend can label them correctly. how m...

In this case, you can virtually always make $1B, but Kelly does not apply because the goal is not to maximize wealth.

<t>Kelly says not to bet anything because you do not have an advantage. Winning $1B is virtually impossible, so I really doubt a simulation will give you the precision you're looking for.To maximize your chances, you want to choose a bet size that minimizes the number of wins required to get $1B. Fr...

QuoteOriginally posted by: secret2So far as I know I don't think any theory requires that implied vol. for put = implied vol. for call.Put-call parity does for European options.

There are really two prices, bid and ask. I would think the range of implied vols should overlap, or at least be very close to avoid arbitrage.

QuoteOriginally posted by: ChurchHi,If a volatility term structure is decreasing, it implies a certain autocorrelation of the underlying variable.ThanksWhy is that?

<t>QuoteOriginally posted by: UnowenIf one wants to price an option on a total return index, such as S&P 500 total return, and use Black Scholes, is it sufficient to set the dividend yield on the index to zero? If not, what should be used? Are the other inputs to the formula the same as if the u...

<t>QuoteOriginally posted by: persefoniwhat is the best way, if any, to determie the risk of a portoflio consisting of only options contracts (listed US Equity options).Is there any benefit in converting the contract size, into the equivalent number of shares (by multiplying the delta) and then usin...

<t>QuoteOriginally posted by: daveangeli think you are probably correct but this is beyond the scope of the OP's question.OK, I would agree that it seems the purpose of the problem is to use Beta to find the expected return of the stock. We could just assume the volatility that is given does not inc...