SERVING THE QUANTITATIVE FINANCE COMMUNITY

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by Gmike2000
December 7th, 2010, 11:46 pm
Forum: Student Forum
Topic: Underlying on swaption
Replies: 19
Views: 27444

Underlying on swaption

<t>There is no spot<->forward arbitrage between the 5yr spot swap and the 1y5y swap.There is, however, a spot<->forward arbitrage between the cash stock and the 1yr futures on the stock (if such a contract existed).Think about it this way: You short the futures and buy the stock. Then, at expiration...
by Gmike2000
December 7th, 2010, 11:30 pm
Forum: Economics Forum
Topic: Indicative Callable Range Accrual Investment FRNID
Replies: 6
Views: 31958

Indicative Callable Range Accrual Investment FRNID

<t>Oh no worries, you can be kind and a good trader at the same time. The evil trader is such a cliche.And about this particular topic: You would not believe how surprised people were when issuers started not calling exotic issues during the financial crisis. It really took everyone by surprise. It ...
by Gmike2000
December 7th, 2010, 11:11 pm
Forum: General Forum
Topic: answer to derman
Replies: 1
Views: 21689

answer to derman

<t>If I may add some words on the OTC market. There, prices are a lot less visible. Brokers sit in the middle of it and feed quotes and trades to the various trading desks. It seems everyone is looking at everyone else when marking/quoting/trading a particular price. Models? I dont think models make...
by Gmike2000
December 6th, 2010, 10:16 pm
Forum: Economics Forum
Topic: Indicative Callable Range Accrual Investment FRNID
Replies: 6
Views: 31958

Indicative Callable Range Accrual Investment FRNID

<t>I think it is the opposite actually. If the issuer gets into solvency/liquidity problems, then he is less likely to call the bond. Because in the event of a call, the issuer has to repay 100 on the dollar. Now, in the case of solvency/liquidity problems, the issuer could get blocked out of the mo...
by Gmike2000
December 5th, 2010, 11:14 pm
Forum: Student Forum
Topic: Ed Thorp's Beat The Market - still useful?
Replies: 2
Views: 21991

Ed Thorp's Beat The Market - still useful?

It reads like one of those "You can be a millionaire too" advertisements. He tried to keep things very simple and targeted the typical sub-par-IQ American end consumer. I recommend the book only as a collector's item.
by Gmike2000
December 5th, 2010, 11:08 pm
Forum: Economics Forum
Topic: the cost and benefit of unemployment insurance, the stupidest money ever spent
Replies: 15
Views: 33096

the cost and benefit of unemployment insurance, the stupidest money ever spent

<t>There are cities in Europe in which (17th - 18th century) houses appear to be very very narrow. Walk inside and the layout is ridiculous...5 meters wide by perhaps 20 meters deep. Because in those old days house owners where taxed by the area of the building's facade! And it influences the way pe...
by Gmike2000
December 5th, 2010, 11:01 pm
Forum: General Forum
Topic: disagree with Wilmott about hf automation
Replies: 3
Views: 22083

disagree with Wilmott about hf automation

<t>I have said it before and so let me say it again: High frequency traders are like flies that suck on shit. They don't make bear markets, they don't make bull markets either. Markets (not just in stocks, in financial derivatives as well) have been around for over 500 years, without HF traders.We c...
by Gmike2000
December 4th, 2010, 9:18 pm
Forum: Trading Forum
Topic: SABR Interest Rate Exotic Derivatives
Replies: 4
Views: 25485

SABR Interest Rate Exotic Derivatives

<t>I think the problem with SABR is that it no longer fits the whole skew in almost every market. As a result it is not applicable to CMS type payoffs. Regarding callable range accruals, in my days I was pretty happy managing them in a 1-factor framework without stochvol, but exact skew calibration....
by Gmike2000
December 3rd, 2010, 6:21 pm
Forum: Careers Forum
Topic: English University Fees [Tuition]
Replies: 7
Views: 22087

English University Fees [Tuition]

<t>The inconvenient truth about the high tuition in the US is that it barely covers the fix costs of the universities. In order to finance their budgets, they depend crucially on alumni donations (and endowment returns). Universities are expensive.The total cost per student is about the same in the ...
by Gmike2000
December 2nd, 2010, 9:17 pm
Forum: Student Forum
Topic: Government Bonds and Currency
Replies: 16
Views: 23120

Government Bonds and Currency

<t>If the Euro ceases to exist, this means the ECB will cease to exist as well, or at least become meaningless. Countries would start setting their own money market rates again (for their own currencies), like in the old days.In this case it is up to the individual country to decide how to make its ...
by Gmike2000
December 2nd, 2010, 8:55 pm
Forum: Numerical Methods Forum
Topic: Using regressions to find illiquid points
Replies: 3
Views: 26263

Using regressions to find illiquid points

Sounds like PCA? Is that what you are looking for?
by Gmike2000
December 2nd, 2010, 8:54 pm
Forum: Economics Forum
Topic: Indicative Callable Range Accrual Investment FRNID
Replies: 6
Views: 31958

Indicative Callable Range Accrual Investment FRNID

<t>And on a related note, these things incorporate all kinds of fees by the issuing bank. I would think there are at least 30bps priced in as fees. And then you will always be dependent on the bank to make you a price if you want to sell the note.So if you have a view on rates and on monetary policy...
by Gmike2000
December 2nd, 2010, 8:51 pm
Forum: Economics Forum
Topic: Indicative Callable Range Accrual Investment FRNID
Replies: 6
Views: 31958

Indicative Callable Range Accrual Investment FRNID

<t>First of all, these things are structured to pay above market coupons. So this means your corporation would buy them and receive the coupon. The consequence of that is that the call option would only be exercised if market rates go down.In all likelihood, assuming an unchanged environment, the th...
by Gmike2000
December 2nd, 2010, 8:36 pm
Forum: Economics Forum
Topic: Economic significance of fractional reserve banking
Replies: 17
Views: 31153

Economic significance of fractional reserve banking

Country 'A' would evolve like a western country, with occasional financial crises, but faster mean growth. Country 'B' would degenerate into a tribal society, blame country 'A' for their misery and encourage its people to wage holy war against 'A'.
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