Frequently Asked Questions In Quantitative Finance

182 Frequently Asked Questions In Quantitative Finance Because of the relative liquidity of the instruments it is common to use ...

Chapter 2: FAQs 183 What is the LIBOR Market Model and Its Principal Applications in Finance? Short Answer The LIBOR Market Mode ...

184 Frequently Asked Questions In Quantitative Finance The first step on the stochastic interest rate path used a very short-ter ...

Chapter 2: FAQs 185 The business of calibration in such models was rarely straightforward. The next step in the development of m ...

186 Frequently Asked Questions In Quantitative Finance Again, the LMM is solved by simulation with the yield curve ‘today’ being ...

Chapter 2: FAQs 187 Hull, JC & White, A 1990 Pricing interest rate derivative secu- rities.Review of Financial Studies 3 573 ...

188 Frequently Asked Questions In Quantitative Finance What is Meant by the ‘Value’ of a Contract? Short Answer Value usually me ...

Chapter 2: FAQs 189 This simple example illustrates the subtlety of the whole valuation/pricing process. In many ways options ar ...

190 Frequently Asked Questions In Quantitative Finance is incorrect. Commonsense says all three are to blame. Whenever you calib ...

Chapter 2: FAQs 191 What is Calibration? Short Answer Calibration means choosing parameters in your model so that the theoretica ...

192 Frequently Asked Questions In Quantitative Finance that it might give prices that are inconsistent with the market. For exam ...

Chapter 2: FAQs 193 models to price an exotic contract how do you know which price to use? How do you know which gives the bette ...

194 Frequently Asked Questions In Quantitative Finance What is the Market Price of Risk? Short Answer The market price of risk i ...

Chapter 2: FAQs 195 In derivatives theory we often try to model quantities as stochastic, that is, random. Randomness leads to r ...

196 Frequently Asked Questions In Quantitative Finance When you cannot hedge. Examples: jump models; default models; transactio ...

Chapter 2: FAQs 197 at a times series of the value of that quantity. But how can you estimate its market price of risk? Market p ...

198 Frequently Asked Questions In Quantitative Finance What is the Difference Between the Equilibrium Approach and the No-Arbitr ...

Chapter 2: FAQs 199 models tend to be of more academic than practical interest. No-arbitrage, or arbitrage-free, models represen ...

200 Frequently Asked Questions In Quantitative Finance traded prices. Now the prices may be correct based on the statistics of t ...

Chapter 2: FAQs 201 How Good is the Assumption of Normal Distributions for Financial Returns? Short Answer The answer has to be ...