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by Alkmene
May 27th, 2010, 4:00 am
Forum: Technical Forum
Topic: hitting time fixed barrier
Replies: 8
Views: 29336

hitting time fixed barrier

<t>How do I approach (and is there a closed form answer) the problem of the expected time a barrier will be hit under a GBM model for a share price with a fixed maturity?E.g., S0=100, Barrier=120, all other usual assumptions and inputs as in BS, what is the E(hitting time)?Is it something like the s...
by Alkmene
May 26th, 2010, 1:22 am
Forum: Trading Forum
Topic: Technical Analysis
Replies: 7
Views: 29067

Technical Analysis

No, nothing has ever been written about it.Sorry just being in a bad mood, but how about amazon or a google search.On a side note, I would not waste your time studying it.Alk
by Alkmene
May 25th, 2010, 11:19 pm
Forum: Technical Forum
Topic: underlying as numerarire
Replies: 1
Views: 27269

underlying as numerarire

<t>I used to derive my share digital prices based on the martingale property using the underlying as the numeraire. Now I am starting to wonder: I know it works but what am I actually saying here? How does this compare to the risk neutral measure.I know that the risk neutral measure does not work fo...
by Alkmene
May 20th, 2010, 5:54 am
Forum: Technical Forum
Topic: simple convertible question
Replies: 7
Views: 28310

simple convertible question

Danke Hansi, also einfach ist das nicht. Es wird immer so dargestellt als ob man einfach BS+bond addiert!Danke,Alk
by Alkmene
May 20th, 2010, 12:07 am
Forum: Technical Forum
Topic: simple convertible question
Replies: 7
Views: 28310

simple convertible question

<t>If someone says: "you can price a simple convertible bond by adding a call to a vanilla bond", then I think (I am an idiot and a half and naive too): good idea! [Please ignore any credit spread, default, IR, other risks you can think of]But then I think: If I have a fixed conversion ratio, meanin...
by Alkmene
May 19th, 2010, 11:57 pm
Forum: Technical Forum
Topic: risk neutral implied probability
Replies: 10
Views: 31062

risk neutral implied probability

<t>we can, because the risk neutral measure is a money market account and does not have its own brownian motion (if you chose to model assets that way) and hence no Vol of its own.If you chose another risky asset as your numeraire (as you have to if you are valuing more complicated instruments like ...
by Alkmene
May 19th, 2010, 4:05 am
Forum: General Forum
Topic: Kerry Back book question
Replies: 1
Views: 27218

Kerry Back book question

Glad that I felt dumb because I am. An idiot and a half I am.What a mistake I made I can't disclose because it is too embarassing.I feel ashamed. But I have the answer.Thanks,Alk
by Alkmene
May 19th, 2010, 2:14 am
Forum: General Forum
Topic: Kerry Back book question
Replies: 1
Views: 27218

Kerry Back book question

<t>I like the book but there is quite a bit to be confirmed if one wants to follow it completely.One result I would need a bit of help with and it is very simple. Appreciate if anyone who has the book and 2 spare minutes:2005 Edition, "a course in derivssecurities", page 42, "Another risky asset as ...
by Alkmene
May 17th, 2010, 5:47 am
Forum: Student Forum
Topic: normal assumption for returns despite lower limit
Replies: 5
Views: 27524

normal assumption for returns despite lower limit

<t>In general, model the prices/returns in whatever form you think fit. Sometimes you might want to show that your assumptions are good and the distribution a "good" fit to real life data ("good" luck with this ...)If you have a bunch of data, try plotting and fitting until you have a good fit by so...
by Alkmene
May 13th, 2010, 3:55 am
Forum: Technical Forum
Topic: FX RISK
Replies: 2
Views: 28121

FX RISK

Whatever you assume to drive the instruments you are contemplating the riskiness of.Forex would certainly include:movements in FX, crosses, IRs, economic factors, correlation between all of them ... but in my humble opinion a futile exercise. Stick to the usual stuff.Alk
by Alkmene
May 12th, 2010, 2:18 am
Forum: Student Forum
Topic: black76 and SABR
Replies: 3
Views: 29750

black76 and SABR

<t>QuoteOriginally posted by: OrbitThe SABR model gives a Black Scholes volatility that is dependent on strike (or moneyness) but also as a function of underlying. So the underlying moves and SABR will tell you what it thinks the vol ought to be now.Just to make sure; I believe it is based on the Bl...
by Alkmene
May 12th, 2010, 2:12 am
Forum: Student Forum
Topic: Help Statistic formula Vasicek Bond Price!!
Replies: 1
Views: 28243

Help Statistic formula Vasicek Bond Price!!

<t>Baaaahhh, I wish I would understand these things a bit better but if you put together the Novikov condition and the Radon Nicodym derivative you end up with Girsanov's Theorem, which is applied here. If you replace ...+1/2*V() with the expression for the variance, it is easier to see.To understan...
by Alkmene
May 12th, 2010, 1:57 am
Forum: General Forum
Topic: General Definition of Duration
Replies: 5
Views: 28073

General Definition of Duration

Duration is misnomer of first derivative of price wrt to yield in some sense. Most likely because of the Mac duration which is the aforementioned weighted by time.Now worry about the second derivative of price to yield!Bumping the curve is duration derived numerically.Alk
by Alkmene
May 10th, 2010, 6:03 am
Forum: Trading Forum
Topic: Trying to get some sense ...
Replies: 3
Views: 28726

Trying to get some sense ...

Thanks Orbit.What about risk managing, as opposed to hedging, i.e., bucketing, bpv, duration, etc, all for nothing on the short side of things?Any models used?Thanks for any hints,E
by Alkmene
May 9th, 2010, 11:17 pm
Forum: Trading Forum
Topic: Trying to get some sense ...
Replies: 3
Views: 28726

Trying to get some sense ...

... of what this involves:manage a 12 month money market book?I supoose that this involves using futures, caps, floors to risk manage the short end?Seems like convexity is a small(ish) issue here.Anyone working in such a role?Thanks,Alk
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