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by Alan
March 10th, 2006, 12:56 am
Forum: Brainteaser Forum
Topic: metateaser
Replies: 7
Views: 116549

metateaser

... or found on the bizarro internet
by Alan
March 9th, 2006, 7:07 pm
Forum: Brainteaser Forum
Topic: metateaser
Replies: 7
Views: 116549

metateaser

Problem: post a teaser which cannot be found on the internet
by Alan
March 9th, 2006, 5:43 pm
Forum: Programming and Software Forum
Topic: Help needed with Heston parameter estimation using ML
Replies: 7
Views: 116571

Help needed with Heston parameter estimation using ML

<r>Hard to say. One possibility is your Heston model evaluation ismessed up. Try it on the parameter set I posted in this thread:<URL url="http://www.wilmott.com/messageview.cfm?catid=10&threadid=35803If"><LINK_TEXT text="http://www.wilmott.com/messageview.cfm? ... id=35803If">http://www.wilmott...
by Alan
March 9th, 2006, 3:30 pm
Forum: Student Forum
Topic: Lesbegue Integral
Replies: 6
Views: 116233

Lesbegue Integral

Yeah, but one expression has a (1/T) and one does not, right? p.s. since BM has dimension [W]= T^{1/2} it's easy to see the right powers.
by Alan
March 9th, 2006, 3:25 am
Forum: Student Forum
Topic: Lesbegue Integral
Replies: 6
Views: 116233

Lesbegue Integral

<r>The expression (1/T) integral{0,T} W(t) dt is the average of Brownian motion.It's an integral which is also a random variable.It turns out this random variable is normally distributed with mean 0 and variance T/3.The mean is perhaps obvious; to see why the variance is T/3, study these notes, say ...
by Alan
March 8th, 2006, 5:03 pm
Forum: Numerical Methods Forum
Topic: Inverse of cumulative normal distribution
Replies: 3
Views: 118850

Inverse of cumulative normal distribution

<r>Here is an alternative method that works well: <URL url="http://mathworld.wolfram.com/Box-MullerTransformation.htmlBut"><LINK_TEXT text="http://mathworld.wolfram.com/Box-Muller ... on.htmlBut">http://mathworld.wolfram.com/Box-MullerTransformation.htmlBut</LINK_TEXT></URL>, to answer your original...
by Alan
March 8th, 2006, 3:09 am
Forum: Technical Forum
Topic: Volatility Swap
Replies: 16
Views: 120278

Volatility Swap

You're very welcome, Alan. If the xerox was because my book was out of print, it's back in stock now. Certainly email me your paper.regards,
by Alan
March 6th, 2006, 7:40 pm
Forum: Technical Forum
Topic: 3-factor gaussian affine model
Replies: 2
Views: 116187

3-factor gaussian affine model

<t>Usually the way this works is that you start with the pde solved by p(x,tau). You insert the proposed solution form, cancel all the exponentials, and are left with something that looks likestuff1(t) + stuff2(t) x = 0This has to be true for all t and all x.That only happens if stuff1(t) = 0 andstu...
by Alan
March 6th, 2006, 2:40 am
Forum: General Forum
Topic: Volatility Ruled Based Trading
Replies: 2
Views: 116258

Volatility Ruled Based Trading

<t>QuoteOriginally posted by: lenniHi, I forget what it is called where you make the rules up over profitable trades on a 5 year history and then test if they are profitable over a 10 year history.iAfter the first study doesn't quite work, when you go back and do it again, it's called "data snooping...
by Alan
March 6th, 2006, 1:11 am
Forum: Technical Forum
Topic: Help on Fokker-Planck Diffusion Tensor
Replies: 9
Views: 118907

Help on Fokker-Planck Diffusion Tensor

<t>QuoteOriginally posted by: PaperCutI've been thinking and I'm stuck:Uncertain Underlying: 1 x 1Uncertain Underlying & Uncertain Vol: 2 x 2Uncertain Underlying, Uncertain Vol and Uncertain Rates: 3 x 3...and so on.What would be the physical system where the tensor is 2 x 2 x 2 ?Thx in advance,...
by Alan
March 6th, 2006, 12:17 am
Forum: General Forum
Topic: Does Option Pricing contradict CAPM and equity premium assumptions?
Replies: 12
Views: 118926

Does Option Pricing contradict CAPM and equity premium assumptions?

QuoteOriginally posted by: exotiq There have been more than a few studies suggesting that the equity premium is statically no different from 0 and that 20th century data is anolomolous...Yeah, but there are cranks in every field
by Alan
March 5th, 2006, 2:07 am
Forum: Numerical Methods Forum
Topic: Mathematica for Greeks--trick to get 'simple' results
Replies: 14
Views: 121712

Mathematica for Greeks--trick to get 'simple' results

<t>In an earlier post, I said this was a waste of time for Black-Scholes. This was a stupid remark -- quanties' post reminded me that I had a need for very high derivatives of B-S for a volatility ofvolatility expansion. I could never have done this without Mathematica.The trick I used there was to ...
by Alan
March 5th, 2006, 1:44 am
Forum: Technical Forum
Topic: Stopping a mean reversion process
Replies: 3
Views: 117850

Stopping a mean reversion process

<t>1) Solve (1/2) sigma^2 v''(x) + a (b - x) v'(x) = -1 in b < x < infty subject to v(b) = v(infty) = 0 Then, E[\tau| X(0) = r0] = v(r0) for any b < r0 < infty Karlin & Taylor, 2nd course, p193regards, p.s. technically, this \tau is the firsthitting time of either b or infty, but as long as you ...
by Alan
March 4th, 2006, 5:14 pm
Forum: General Forum
Topic: The Fallacy of Time Diversification for Volatility
Replies: 1
Views: 116527

The Fallacy of Time Diversification for Volatility

<t>I think most people appreciate the fallacy of the timediversification argument for the stock market. This isthe flawed argument that, since the annualized growth ratehas a smaller variance over time, your risk is decreasing.Of course, your dollar risk is, in fact, increasing over time.What brings...
by Alan
March 3rd, 2006, 9:39 pm
Forum: Technical Forum
Topic: Volatility Swap
Replies: 16
Views: 120278

Volatility Swap

<t>If the market convention defines the vol. payoff asbased upon the -annualized- realized volatility (even when the contractlength is greater than one year), then the answer is yes.You could certainly enter a swap contract with somebody andmutually agree to a payoff without the sqrt{T} factor.What ...