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by Alkmene
May 3rd, 2010, 5:19 am
Forum: Technical Forum
Topic: FX CBs - urgent
Replies: 0
Views: 28688

FX CBs - urgent

<t>I am in a bit of a tight spot here.Any help appreciated. I need to estimate a CB in a foreign currency with referrence to a domestic stock. It has an issuer call attached as well.I have very limited time and was thinking of getting some sense of the value by doing the following:Assume bond value ...
by Alkmene
April 20th, 2010, 11:54 pm
Forum: Technical Forum
Topic: Ito understanding
Replies: 5
Views: 32012

Ito understanding

<t>Thanks for our reply. I am still trying to understand if the convergence in probability is, in essence, an expected value because of the probability component. In mean square convergence as a criterion, we use the E[(x-y)^2] as a criterion for x => y and I am wondering if that makes an Ito integr...
by Alkmene
April 19th, 2010, 1:32 am
Forum: General Forum
Topic: dS/S = drift*dt + sigma*dW; drift what? sigma what?
Replies: 3
Views: 30295

dS/S = drift*dt + sigma*dW; drift what? sigma what?

<t>Might off track here but is seems to be easier to hedge a derivative with the underlying and decide that this is a riskless portfolio given the right amount of underlying per derivative (if possible) rather then to own every investment that exists.If this is the case, then you can replace the dri...
by Alkmene
April 19th, 2010, 1:23 am
Forum: Technical Forum
Topic: Ito understanding
Replies: 5
Views: 32012

Ito understanding

<t>Does "convergence in mean square" imply, simply stated, that the result of Ito integration is some form of expected value? I know quite a bit about the technical part of the Ito calculus but I am trying to get more realistic about what it actually means ...I am asking because there rarly is an ex...
by Alkmene
March 24th, 2010, 9:48 pm
Forum: Student Forum
Topic: Correlation between sum and difference of uniform random variables
Replies: 3
Views: 31934

Correlation between sum and difference of uniform random variables

Quoteare they also correlated or are they independent?they could be dependent and uncorrelated too! that's not a strict dichotomy.Alk
by Alkmene
March 24th, 2010, 9:42 pm
Forum: Student Forum
Topic: sum of x^x for x = 1 to n
Replies: 2
Views: 29286

sum of x^x for x = 1 to n

double post
by Alkmene
March 24th, 2010, 9:41 pm
Forum: Student Forum
Topic: sum of x^x for x = 1 to n
Replies: 2
Views: 29286

sum of x^x for x = 1 to n

reminds me of the Sophomore's Dream. That might help?Cheers,alk
by Alkmene
March 24th, 2010, 5:06 am
Forum: General Forum
Topic: Help with lognormal price distribution
Replies: 5
Views: 30101

Help with lognormal price distribution

<t>QuoteOriginally posted by: wpgabrielI believe that using GBM, which many option pricing formulas assume, the distribution of log returns will be:~Normal ( log S + (r - sigma^2/2)*T, sigma^2 * T)This is assuming your drift is set to the risk-free rate of return. So if you have a zero interest rate...
by Alkmene
March 22nd, 2010, 8:54 pm
Forum: General Forum
Topic: Help with lognormal price distribution
Replies: 5
Views: 30101

Help with lognormal price distribution

<t>QuoteOriginally posted by: notNotDanielHi,Intuitively, the probability of being below or above the current price should be 50%. Any clarifications on why that isn't the case would be greatly appreciated.This is not true for a lognormal distr as it is skewed; up move is more likely than a down mov...
by Alkmene
March 15th, 2010, 9:15 pm
Forum: Student Forum
Topic: American and European Put Option
Replies: 6
Views: 33064

American and European Put Option

<t>QuoteOriginally posted by: daveangelQuote lso,the price of an American put (with no dividend until maturity) is equal to the European put. not true - American put has greater value than European put if r > 0.Imagine K=100 and S=.01; you would exercise a Put option there and then if you have a pos...
by Alkmene
March 15th, 2010, 9:09 pm
Forum: Student Forum
Topic: Change in Delta
Replies: 1
Views: 28907

Change in Delta

something likedelta_new=delta_old + change_underl * gammadon't forget though that this is all non linear and this approximation will be bad at times because a 10% change is rather large.Give us some numbers and we can work it out.Alk
by Alkmene
March 4th, 2010, 11:51 pm
Forum: General Forum
Topic: Choice of Mean in Mean Reverting Trade Analysis
Replies: 6
Views: 31298

Choice of Mean in Mean Reverting Trade Analysis

<t>QuoteOriginally posted by: willsmithChoosing a rolling mean is basically a moving average. If you go this route you're probably better off with an exponentially weighted moving average rather than a simple window. Then you have the problem of chosing the decay factor lamda. One problem replaced w...
by Alkmene
March 4th, 2010, 11:51 pm
Forum: General Forum
Topic: Choice of Mean in Mean Reverting Trade Analysis
Replies: 6
Views: 31298

Choice of Mean in Mean Reverting Trade Analysis

<t>QuoteOriginally posted by: willsmithChoosing a rolling mean is basically a moving average. If you go this route you're probably better off with an exponentially weighted moving average rather than a simple window. Then you have the problem of chosing the decay factor lamda. One problem replaced w...
by Alkmene
February 28th, 2010, 10:43 pm
Forum: Student Forum
Topic: Can a Geometric Brownian Motion *really* never go negative?
Replies: 22
Views: 36084

Can a Geometric Brownian Motion *really* never go negative?

<t>QuoteOriginally posted by: CuchulainnThe problem is you are using Explicit Euler method. There is a word for it that we don't use in polite company. Another problem is you have a large sigma.Cuch,since I am reading this thread, the company is not as polite as you think - please state the word, wi...
by Alkmene
February 27th, 2010, 8:11 am
Forum: General Forum
Topic: Betting Strategy - Gaussian Distribution
Replies: 5
Views: 31083

Betting Strategy - Gaussian Distribution

you might want to rephrase this question. +EV depends on the EV so there is a clear hint as to the need of some knowledge of the paramters of this normal distrib.But, as usual, the expectation is that I missed the point.Alk
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