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by mtsm
April 5th, 2017, 12:56 am
Forum: General Forum
Topic: Why is SABR so popular in the rates world?
Replies: 19
Views: 2172

Re: Why is SABR so popular in the rates world?

SABR greeks, forget intrinsic. I meant the actual SABR greeks. The Bartlett corrections tries to address the daily recalibration problem heuristically. It's not working in my experience, but experiences vary. The same is true of the backbone. I don't think it's a good backbone, but others like it, t...
by mtsm
March 31st, 2017, 1:37 pm
Forum: General Forum
Topic: Why is SABR so popular in the rates world?
Replies: 19
Views: 2172

Re: Why is SABR so popular in the rates world?

what is this supposed to mean? of course there are alternatives. the market isn't a function of the model, it's the other way round. 
by mtsm
March 31st, 2017, 1:38 am
Forum: General Forum
Topic: Why is SABR so popular in the rates world?
Replies: 19
Views: 2172

Re: Why is SABR so popular in the rates world?

I am not familiar with SVI, but somewhat with SABR from an operational point of view as well as quant point of view.  All the shortcomings of SABR are as you say. You can somewhat work around the low strike problem by shifting as far as I remember, but pricing of low or negative strikes will still b...
by mtsm
March 28th, 2017, 12:25 am
Forum: Technical Forum
Topic: (discount and forward) curve interpolation - sophisticated methods or keep it simple?
Replies: 19
Views: 2199

Re: (discount and forward) curve interpolation - sophisticated methods or keep it simple?

Other than that, I can see a lot of reasons why you would want to have better curves than what you describe.  Can you name any of those reasons? The only problem I am seeing with what you describe is that you might want to express n-1 of your curves as spreads to one base curve. Good point. I think...
by mtsm
March 27th, 2017, 1:59 pm
Forum: Technical Forum
Topic: (discount and forward) curve interpolation - sophisticated methods or keep it simple?
Replies: 19
Views: 2199

Re: (discount and forward) curve interpolation - sophisticated methods or keep it simple?

You are just wrong about that Gamal. Absence of arbitrage is very much a theoretical concept. Most of the time you would not even be able to observe it. It's just not necessarily the way a real market works. Of course if you live in this silly quant world and you believe that rates and vols just exi...
by mtsm
March 26th, 2017, 1:20 pm
Forum: Technical Forum
Topic: (discount and forward) curve interpolation - sophisticated methods or keep it simple?
Replies: 19
Views: 2199

Re: (discount and forward) curve interpolation - sophisticated methods or keep it simple?

Absence of arbitrage is actually overrated. You are better of with a simple flexible model with a little arbitrage, than with a overly restrictive arb free model. Noticed time and time again. With regards to curves, it really depends on the end users. If you have a not overly sophisticated crowd at ...
by mtsm
March 18th, 2017, 2:40 pm
Forum: General Forum
Topic: edurdollar future option's forward : arbitrage?
Replies: 5
Views: 868

Re: edurdollar future option's forward : arbitrage?

Yes, convexity is part of this story.
by mtsm
March 17th, 2017, 1:53 pm
Forum: General Forum
Topic: edurdollar future option's forward : arbitrage?
Replies: 5
Views: 868

Re: edurdollar future option's forward : arbitrage?

pm me about this if you want. also why make this info public?
by mtsm
March 10th, 2017, 2:14 pm
Forum: General Forum
Topic: Rates - Pricing Model Limitations/Issues
Replies: 14
Views: 1798

Re: Rates - Pricing Model Limitations/Issues

Not sure why you talk about prediction. Did I say anything about that?
by mtsm
March 9th, 2017, 9:34 pm
Forum: General Forum
Topic: Rates - Pricing Model Limitations/Issues
Replies: 14
Views: 1798

Re: Rates - Pricing Model Limitations/Issues

It's actually more tricky than this... Those who write about this tend to be overly optimistic and always reassure us that financial asset prices follow a random walk, that the market is efficient, etc..., that one can take these as safe starting points to further developments. The proof is often as...
by mtsm
March 8th, 2017, 5:37 pm
Forum: General Forum
Topic: Rates - Pricing Model Limitations/Issues
Replies: 14
Views: 1798

Re: Rates - Pricing Model Limitations/Issues

Inconsistent evolution of rates generated by a calibrated model to reality on ground.
Second that. Basically all quantitative finance models going back to Bachelier, Samuelson, Black-Scholes and the whole industry on top of that are wrong. Quantitative analysts are a dying breed.
by mtsm
March 2nd, 2017, 2:55 am
Forum: General Forum
Topic: Receiver Swaption / Yield Curve Steepening
Replies: 3
Views: 770

Re: Receiver Swaption / Yield Curve Steepening

I would think about a receiver swap first. You receive, so you sold a stream of little libors to your counterparty. Also assume a level move first instead of a steepener, etc...  
by mtsm
February 23rd, 2017, 6:16 pm
Forum: General Forum
Topic: Building a swaption implied volatility surface from ATM quotes only using SABR model.
Replies: 8
Views: 1190

Re: Building a swaption implied volatility surface from ATM quotes only using SABR model.

It depends what you are trying to do. A lot of people in this thread think sell-side and for that purpose, good luck trying to find a meaningful calibration. On the other hand if you have access to the history of forward rates and ATM vol, I believe you can get quite creative and you might end up wi...
by mtsm
January 20th, 2017, 6:39 pm
Forum: Technical Forum
Topic: Bermudan swaption with exercise notice
Replies: 4
Views: 853

Re: Bermudan swaption with exercise notice

If I am not misunderstanding what you are saying, this sounds like some kind of midcurve (early exercise) structure baked into a bermudan. What you call exercise date, is more like the effective date, since you effectively exercise 1y ahead.  I don't think this is standard. Why are you looking at th...
by mtsm
January 13th, 2017, 4:19 am
Forum: General Forum
Topic: Quantopian – why I don’t take part
Replies: 3
Views: 1005

Re: Quantopian – why I don’t take part

You forgot to tell us that you are a most handsome gentleman also... I read your blog post. Most of what Quantopian requires is true for any hedge fund. That is just the way it is and it mostly makes sense, even if you disagree with it. It's exactly what would be required of you if you were working ...
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