Black-Scholes or Bust There are two ways to look at the derivation of Black-Scholes: (i) the way Black and Scholes derived it originally, which was…
Comments closedCategory: Models
At work this morning I found myself thinking about calibration. Lately, some people have tried to debunk the idea of calibrating financial models, but I…
Comments closedThe other day I wanted to look up some statistics on certain stocks — volatility, correlation with the S&P, etc. I went to yahoo/finance and…
Comments closedI received an interesting-looking paper which I converted to PDF and posted at www.ederman.com…… Avoiding Economic Crises via the Stochastic Money Supply Falip. O. Lor…
Comments closedPreface A spectre is haunting Markets ? the spectre of illiquidity, frozen credit, and the failure of financial models. Beginning with the 2007 collapse in…
Comments closedwww.edge.org…… has a proposal Can Science Help Solve The Economic Crisis? www.edge.org…… for a group of scientists and economists to collaborate in solving the economic…
Comments closedbut a good cigar is a smoke. Rudyard Kipling understood this. Why does no one else?
Comments closed? Part of the trouble with the economic crisis is that people and firms have an incentive to borrow short term to invest in long-term…
Comments closedThe last two years I spent at Goldman in risk management I was involved in developing methodologies to mark illiquid derivatives held by a variety…
Comments closedI spent most of my time in firmwide risk management at Goldman trying to get traders to mark their exotic products to market, or else…
Comments closedI saw this conclusion on a website about the sociology of finance: “Are the purveyors of models selling us lemons? At the core of the…
Comments closedWritten for the Encyclopedia of Quantitative Finance www.ederman.com……
Comments closedToday’s News Of The Week in Review has an article about the precipitous temporary decline in UAL stock when an old news story about their…
Comments closed1. When did people first start to begin their emails with “Good morning” or “Good afternoon”? It suggests that you’re going to pay attention to…
Comments closedThere’s an article in the Sunday NY Times Business Section and one in the Economist. I have to say I’ve never seen anything really comforting…
Comments closedThis is an unconsidered piece. I’m a little tired of reading about what a travesty Black-Scholes is. First of all, the real trouble isn’t Black-Scholes,…
Comments closedI went to see “I’m Not There”, a movie about Bob Dylan’s double. It’s a bit long, but what’s impressive in the movie, besides his…
Comments closedKerry Back’s excellent Springer book entitled “A Course in Derivative Securities” makes a remark about the numeraire/martingale way of looking at options pricing: “It seems…
Comments closedGAIM recently had an all-day conference in New York City on hedge fund replication. There are three approaches, and I’m a little sceptical/skeptical about them…
Comments closedThe key result of options pricing is that if you hedge at implied volatility, then over the next instant dt a long options position produces…
Comments closedI got a fair number of answers to the question of what single sentence would best pass on the essence of quantitative finance to the…
Comments closedI was having a conversation about model risk the other day, and I think it’s a misnomer. Risk to me means the possibility that something…
Comments closedI was in Geneva at a Risk Conference earlier this week, and one of the talks I heard about behavioral finance posited that the most…
Comments closedIn his review of the recent books by Smolin and Woit on the status of string theory, David Lindley writes: (see www.wilsoncenter.org……): “The problem with…
Comments closedMarek Musiela gave a very interesting talk at Columbia the other evening about trying to use a derivatives framework to handle optimal asset allocation. A…
Comments closedThis is a very old paper we wrote in Quantitative Strategies concerned with how to value options on stocks that settle in the old European…
Comments closedA student at another university recently sent me a question which I’ve often wondered about myself: “Any introductory economics course in college will introduce the…
Comments closed? In implementing models, one of the most common mistakes I’ve made, and seen others make, is to check them sloppily. For example, suppose you…
Comments closedI’m very pleased and very honored to be able to introduce Dr Oldrich Vasicek here today on his induction into the Derivatives Hall of Fame.…
Comments closedMetaphors, Models & Theories When I was in grade school we used to build model airplanes out of kits. The frame was made out precut…
Comments closed