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by gjlipman
September 4th, 2008, 9:48 pm
Forum: Student Forum
Topic: Models Comparisons
Replies: 3
Views: 49339

Models Comparisons

<t>I don't think you quite follow what moltabile was saying. Firstly, you need to decide what your underlying process is. This might be just geometric brownian motion with constant volatility and drift, or it might be something more complex.Secondly, you need to decide what your instrument is - eg e...
by gjlipman
September 4th, 2008, 6:04 am
Forum: Careers Forum
Topic: FE positions in Texas
Replies: 19
Views: 51909

FE positions in Texas

<t>I would have said there were plenty of energy quant / structuring roles for investment banks, hedge funds, energy companies in Houston, probably less in other cities in Texas.Opportunities to move out of energy will be much more limited without moving to New York or London, but in the meantime yo...
by gjlipman
August 31st, 2008, 8:51 pm
Forum: Careers Forum
Topic: commodities quants
Replies: 7
Views: 52217

commodities quants

Usually those sorts of exams are ones that you're required to do to trade certain products (and no one does them for the knowledge). But in the sense that you may not be able to trade without having done them, you could say they're very useful.
by gjlipman
August 25th, 2008, 8:02 pm
Forum: General Forum
Topic: Risk Free rate and Equity Option Prices
Replies: 14
Views: 55316

Risk Free rate and Equity Option Prices

I guess the issue is that the BSM model assumes deterministic interest rates, so if you're asking for a model to look at the inter-relationship between interest rate movements and stock price movements, you're probably better to look at another model.
by gjlipman
August 19th, 2008, 6:26 pm
Forum: Student Forum
Topic: A more than stupid question on BSM
Replies: 20
Views: 52322

A more than stupid question on BSM

As daveangel says, if it were a normal process, the mu and the sigma wouldn't be multiplied by S.
by gjlipman
August 19th, 2008, 7:11 am
Forum: Student Forum
Topic: Vega
Replies: 2
Views: 49819

Vega

<t>A market maker who wants to keep all his risks hedged shouldn't just hedge at the money vega, but also skew vega, so that he doesn't lose money if the smile steepens. If they have skew risk and the skew surface changes, he will gain/lose.A market maker who is truly hedged will generate profit by ...
by gjlipman
August 18th, 2008, 9:17 pm
Forum: Student Forum
Topic: lognormal vs. normal
Replies: 20
Views: 57775

lognormal vs. normal

<t>Actually, I'd just add that sometimes you want a correlation as an input to an option pricing model. And in this case you want whatever correlation the option model assumes. Yes, this will be lognormal 99% of the time, but if your model assumes that both underlyings move in a bivariate normal fas...
by gjlipman
August 18th, 2008, 9:14 pm
Forum: General Forum
Topic: Excel's XIRR function: Determining Guess value
Replies: 15
Views: 57369

Excel's XIRR function: Determining Guess value

<t>If you're suggesting that the algorithm that Excel gives away for free to every Excel user isn't the optimum algorithm for every scenario, I don't think anyone will be surprised. It is designed to be a "jack of all trades", but even Microsoft acknowledge that there'll be times when you need speci...
by gjlipman
August 15th, 2008, 10:44 am
Forum: General Forum
Topic: Random Walkers Thursday 25th of September
Replies: 25
Views: 53193

Random Walkers Thursday 25th of September

Thanks for the advance warning - I've put it in the diary.
by gjlipman
August 14th, 2008, 5:03 am
Forum: Student Forum
Topic: Volatility of a spread
Replies: 5
Views: 50856

Volatility of a spread

<t>There is no right approach that works with all spreads, as different spreads behave differently. So first step should be to understand the distribution of the spread - is it normally distributed, lognormally distributed, shifted lognormally distributed (where spread + x is lognormal), are the two...
by gjlipman
August 11th, 2008, 12:00 pm
Forum: General Forum
Topic: Very simple dispersion option pricer
Replies: 3
Views: 51902

Very simple dispersion option pricer

You'll get a much better value if you simulate byS(t)=exp[(mu-q-1/2vol^2)*YrsTM+vol*sqrt(YrsTM)*e](this being the process assumed by lognormal multivariate)Not entirely certain what you mean by steps 3-5, and am not too familiar with dispersion options.
by gjlipman
August 10th, 2008, 8:24 pm
Forum: Student Forum
Topic: correlation
Replies: 2
Views: 49970

correlation

<t>What do you mean by sigma_xy? Do you mean the 1 day covar?If so, in the case that they follow bivariate normal/lognormal behaviour with constant correlation, I'd punt on yes, because the 1 day and 10 day correlations wouldn't differ. In general, though, it might be possible to get some other corr...
by gjlipman
August 10th, 2008, 11:47 am
Forum: General Forum
Topic: Excel's XIRR function: Determining Guess value
Replies: 15
Views: 57369

Excel's XIRR function: Determining Guess value

I agree with you, AlphaNumericus, but in this particular case the solution Excel was giving wasn't even a solution, which I guess is more of a concern.
by gjlipman
August 9th, 2008, 5:49 am
Forum: General Forum
Topic: Excel's XIRR function: Determining Guess value
Replies: 15
Views: 57369

Excel's XIRR function: Determining Guess value

If this is a problem for you, why don't you code up your own IRR that uses best practice logic (which I admit I don't know what it is). Maybe even try and get hold of the Open Office algorithm. I mean, XIRR is just an addin function to Excel anyway - to use if and only if you find it useful.
by gjlipman
August 8th, 2008, 2:13 pm
Forum: General Forum
Topic: Excel's XIRR function: Determining Guess value
Replies: 15
Views: 57369

Excel's XIRR function: Determining Guess value

<t>Yeah - there will be cases where Excel's default guess doesn't get you to the right answer - I guess it isn't optimised for cases where the IRR is negative. It may even be the case that it doesn't work properly - I notice that XNPV doesn't work in the case you sent (if we change the discount rate...
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