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by Paul
March 6th, 2008, 10:58 am
Forum: Technical Forum
Topic: Is higher order on volatility necessary for digital cap/floor ?
Replies: 3
Views: 57986

Is higher order on volatility necessary for digital cap/floor ?

<t>Depends! My sixth sense tells me someone is about to lose a lot of money! This is classic model-fudge territory. Measuring sensitivity with respect to a parameter that one has assumed to be a constant can be very misleading. Sensible greeks are derivatives w.r.t. 'variables.' The stupid greeks ar...
by Paul
March 6th, 2008, 10:42 am
Forum: Trading Forum
Topic: Algoritmic trading strategies are unsustainable?
Replies: 31
Views: 67218

Algoritmic trading strategies are unsustainable?

<t>QuoteOriginally posted by: AlanFordBut, why do people invest the money in algoritmic trading strategies that are not even tested or don't work? This doesn't make sense.At least two obvious reasons: 1. Fear that they'll miss the next big winner (that they'll end up in the smallest house in the nei...
by Paul
March 5th, 2008, 10:08 am
Forum: Brainteaser Forum
Topic: a formula for a skier sliding down a hill
Replies: 12
Views: 60162

a formula for a skier sliding down a hill

<t>QuoteOriginally posted by: AthleticoNonlinearities always make things untidy -- particularly a logo If you are even considering a formula as a logo then you have far more to worry about than tidiness!Yes, throw in friction. Or how about posing the problem (calculus of variations, I guess) for the...
by Paul
March 5th, 2008, 9:26 am
Forum: Trading Forum
Topic: Trading vs statistical arbitrage
Replies: 15
Views: 64905

Trading vs statistical arbitrage

<t>Just adding to Gmike2000's comment on the matter of who wins and who loses, it is possible for both to win because one might be hedging and the other is not. So one side is exposed to volatility and the other to direction. But then what happens to the party with whom you are dynamically hedging? ...
by Paul
March 5th, 2008, 9:18 am
Forum: Technical Forum
Topic: When we reach the limits of Gaussian copula model for bespoke CDOs pricing, what can we do?
Replies: 33
Views: 65864

When we reach the limits of Gaussian copula model for bespoke CDOs pricing, what can we do?

<t>There is so much going on inside a CDO that I don't think we are anywhere near a good model yet. As soon as a model becomes popular you will find all banks' prices converging, spreads narrowing, profits falling, there is less margin for error and then...Kapow! Something 'unexpected' happens becau...
by Paul
March 5th, 2008, 8:01 am
Forum: Programming and Software Forum
Topic: Risk management system for volatility trading hedge fund
Replies: 14
Views: 62178

Risk management system for volatility trading hedge fund

<t>I ask because if the fund is based on some original idea then I assume that a shop-bought system will not incorporate this idea as standard. But this is something that always bothers me (but probably bothers no one else, and most importantly probably doesn't bother investors!). This is one of the...
by Paul
March 4th, 2008, 9:18 pm
Forum: Off Topic
Topic: Alternative ways of living
Replies: 26
Views: 59138

Alternative ways of living

Step 1 is to become self employed. How many here in that category?P
by Paul
March 4th, 2008, 6:20 pm
Forum: Brainteaser Forum
Topic: a formula for a skier sliding down a hill
Replies: 12
Views: 60162

a formula for a skier sliding down a hill

At least put in some wind resistance to make it nonlinear!P
by Paul
March 4th, 2008, 4:30 pm
Forum: Off Topic
Topic: Alternative ways of living
Replies: 26
Views: 59138

Alternative ways of living

So why did Bill Clinton apologise to the Hawai'ian people in 1993 for the 'overthrow'? P
by Paul
March 4th, 2008, 3:52 pm
Forum: Off Topic
Topic: Alternative ways of living
Replies: 26
Views: 59138

Alternative ways of living

<t>Yes, doomed. Ironically it seems that the ubiquity of 'choice' is part of the problem, homogenizing the planet. (Which is why I'll rather miss old Cuba.) People don't actually like choice as much as commonly thought, too much leads to confusion and envy. I vaguely recall reading that it is optima...
by Paul
March 4th, 2008, 3:33 pm
Forum: Programming and Software Forum
Topic: Risk management system for volatility trading hedge fund
Replies: 14
Views: 62178

Risk management system for volatility trading hedge fund

Can you say more about your vol arb strategies? I.e. where is your edge?P
by Paul
March 4th, 2008, 3:28 pm
Forum: Trading Forum
Topic: Either the markets tricked me into bad trading decisions ... or God punished me for my arrogance
Replies: 12
Views: 60077

Either the markets tricked me into bad trading decisions ... or God punished me for my arrogance

You've been a member of the Forum since August 2004 and this is your first loss? Congratulations, Sir! (BTW Titanic was 1912!)P
by Paul
February 29th, 2008, 6:41 pm
Forum: Book And Research Paper Forum
Topic: Pricing CMS Spread Options and Digital CMS Spread Options with Smile
Replies: 3
Views: 67182

Pricing CMS Spread Options and Digital CMS Spread Options with Smile

Have you ever been to a supermarket and asked for peanut butter only to have the clerk point to a shelf two feet away? Well, this paper was published in our magazine, and was released to the public a while ago. So if you go here and search the articles for "Berrahoui" you will find it.P
by Paul
February 28th, 2008, 9:41 pm
Forum: Technical Forum
Topic: dlog(S) vs dS
Replies: 7
Views: 59565

dlog(S) vs dS

I don't have an exact reference but that sounds like the sort of thing Peter Jaeckel would have explored.P
GZIP: On