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by Gmike2000
May 15th, 2004, 9:51 pm
Forum: Student Forum
Topic: Volatility of return of bond, how to calculate it? (VaR)
Replies: 12
Views: 189984

Volatility of return of bond, how to calculate it? (VaR)

Anybody using VaR --no matter which method-- should be shot/tortured. That includes all risk mgrs and controllers. The ETH guys are excused...because it is not unusual for academics to waste their time on useless things.
by Gmike2000
May 15th, 2004, 9:21 pm
Forum: General Forum
Topic: Absolute Return Funds
Replies: 6
Views: 189375

Absolute Return Funds

aaron: absolute in the sense of never negative, always positive.
by Gmike2000
May 15th, 2004, 9:14 pm
Forum: Technical Forum
Topic: Dividend problem?
Replies: 5
Views: 189792

Dividend problem?

<t>you cannot use actual dividends paid. the market prices expected dividends.you need to back out the expected dividend yield. if you have spot and futures price for the underlying asset (recorded on the same date as the optinos), you could use spot/forward parity and back out the dividend yield pr...
by Gmike2000
May 15th, 2004, 8:55 pm
Forum: Technical Forum
Topic: Duration of CMS
Replies: 7
Views: 190262

Duration of CMS

<t>Thanks for clarifying. I guess I got confused by the nomenclature...our index is always referred to as the constant maturity swap index, but probably has nothing to do with the CMS product you are discussing.This is an interesting product though. I did not know it exists. The way you describe it ...
by Gmike2000
May 11th, 2004, 6:41 pm
Forum: General Forum
Topic: Rate my ignorant futures trading strategy
Replies: 23
Views: 191532

Rate my ignorant futures trading strategy

<t>This reminds me of 1) the petersburg paradox2) the classic option theory paper whose author I dont remember, but it was about intrinsic and time value of options, and why stop loss strategies are not free options3) the scam book I bought the other day on "winning roulette strategies"More on (3): ...
by Gmike2000
May 11th, 2004, 6:15 pm
Forum: Student Forum
Topic: Volatility of return of bond, how to calculate it? (VaR)
Replies: 12
Views: 189984

Volatility of return of bond, how to calculate it? (VaR)

<t>In my opinion, VaR is horseshit. Nonetheless, it is still being used, even in our firm. I am currently in charge of implementing a firm wide VaR model so that our company will comply to the new risk management legislation in Germany. This legislation requires all German asset mgt firms to have a ...
by Gmike2000
May 10th, 2004, 9:24 pm
Forum: General Forum
Topic: Absolute Return Funds
Replies: 6
Views: 189375

Absolute Return Funds

<t>absolute return funds are the latest hot air coming out of the marketing departments of big asset mgt firmsour competitors sell a couple of those. they promise more than 6 hundred bps over Libor per year at libor risk.if that is not hot air...i dont know what it is. long live marketing...and the ...
by Gmike2000
May 10th, 2004, 9:05 pm
Forum: Student Forum
Topic: Future Position in Bonds
Replies: 2
Views: 189178

Future Position in Bonds

<t>10 yr future will outperform...it always outperforms the cash equivalent for various reasons, even when you compare exact duration matched returns.keep in mind...the deliverables basket for the 10yr can include bonds with only 8.5 years to maturity. it is a very big basket of deliverables, and th...
by Gmike2000
May 10th, 2004, 8:59 pm
Forum: Student Forum
Topic: short-term curves
Replies: 2
Views: 189183

short-term curves

yes, this is how we calculate the return of our money market portfolio benchmarks.if indexed to, say, 3M libor: dur*dy+3M rate/360 = 1day returnwhere dur is basically .25
by Gmike2000
May 10th, 2004, 8:54 pm
Forum: Student Forum
Topic: Volatility of return of bond, how to calculate it? (VaR)
Replies: 12
Views: 189984

Volatility of return of bond, how to calculate it? (VaR)

<t>micha, if i understand correctly you are asking what data to use to calculate yield vol.this simply the benchmark yield vol...what benchmark? depends on the curve you need for your bond.if it is a US govt bond, take US curve. it is ok to use vol of CMT rates published by the FED every day.riskmet...
by Gmike2000
May 10th, 2004, 7:28 pm
Forum: Technical Forum
Topic: Duration of CMS
Replies: 7
Views: 190262

Duration of CMS

forgot to add...what sense does the above CMS make? Well, the carry part gets you whatever the 5yr swap rate is on the reset day. But the risk is still that of a 5yr swap
by Gmike2000
May 10th, 2004, 7:26 pm
Forum: Technical Forum
Topic: Duration of CMS
Replies: 7
Views: 190262

Duration of CMS

<t>Hope I am not missing something important here, but IMHO you guys are making it more complicated than it should be. We have a couple hundred million dollar managed against a CMS benchmark in my firm. This benchmark has a duration much higher than just the 6 months or so that someone claims it sho...
by Gmike2000
January 12th, 2004, 8:17 pm
Forum: Numerical Methods Forum
Topic: Monte-Carlo in the future ?
Replies: 11
Views: 190836

Monte-Carlo in the future ?

<t>Regarding MC and american options.....check out longstaff's paper on least squares monte carlo. Simple, but kick ass. Can use easily on bermuda swaptions...this is the latest, and for a long time also the last, word on MC for american options. Has gone largely unnoticed which i do not understand....
by Gmike2000
January 12th, 2004, 8:09 pm
Forum: General Forum
Topic: Int. Rates Jargon
Replies: 11
Views: 191198

Int. Rates Jargon

<t>1) In a steep yield curve environment, like now, the roll down is due to the 1yr rate being higher than the spot rate. So e.g. a 1y bond (futures, swap, etc etc) will appreciate in value, ceteris paribus, just by "rolling down" the curve. You can approximate that by multiplying its duration with ...
by Gmike2000
January 12th, 2004, 7:50 pm
Forum: General Forum
Topic: Anybody need historical intraday data on US equity options?
Replies: 11
Views: 190541

Anybody need historical intraday data on US equity options?

<t>When i was grad student at berkeley i had access to the berkeley options database, which contained tick by tick data on sp500 and sp100 options, from 87 to 97.I used it for a paper on stat arb using sp500 options vs sp500 index.Most of the time was spent cleaning the HUGE qty of data for the purp...
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