Frequently Asked Questions In Quantitative Finance

202 Frequently Asked Questions In Quantitative Finance 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 -4 -3 -2 -1 0 1 2 3 4 Scaled return SPX Ret ...

Chapter 2: FAQs 203 (asymmetry). Whether this matters or not depends on several factors: Are you holding stock for speculation ...

204 Frequently Asked Questions In Quantitative Finance tends to be very small in practice. The real question is about variance, ...

Chapter 2: FAQs 205 If neither of the above is possible then he could widen his bid-ask spreads. He will then only trade with t ...

206 Frequently Asked Questions In Quantitative Finance How Robust is the Black–Scholes Model? Short Answer Very robust. You can ...

Chapter 2: FAQs 207 Volatility is constant: If volatility is time dependent then the Black–Scholes formulæ are still valid as lo ...

208 Frequently Asked Questions In Quantitative Finance need is for the returns distribution to have a finite vari- ance, the pre ...

Chapter 2: FAQs 209 Why is the Lognormal Distribution Important? Short Answer The lognormal distribution is often used as a mode ...

210 Frequently Asked Questions In Quantitative Finance You would expect equity prices to follow a random walk around an exponent ...

Chapter 2: FAQs 211 the stock price is the initial value multiplied bynfac- tors, the factors being one plus the random returns. ...

212 Frequently Asked Questions In Quantitative Finance What are Copulas and How are They Used in Quantitative Finance? Short Ans ...

Chapter 2: FAQs 213 The copula approach in effect allows us to readily go from a single-default world to a multiple-default worl ...

214 Frequently Asked Questions In Quantitative Finance the statistics, the mean, standard deviation, distribution, etc., of the ...

Chapter 2: FAQs 215 This is the probability that an event with probability less thanuoccurs in the first variable given that at ...

216 Frequently Asked Questions In Quantitative Finance What is Asymptotic Analysis and How is It Used in Financial Modelling? Sh ...

Chapter 2: FAQs 217 viscosity. This parameter appears in the Navier–Stokes equation which, together with the Euler equation for ...

218 Frequently Asked Questions In Quantitative Finance We say that f( )∼g( )as → 0 if lim → 0 f( ) g( ) = 1. In finance there ha ...

Chapter 2: FAQs 219 Rasmussen, H & Wilmott, P 2002 Asymptotic analysis of stochastic volatility models. InNew Directions in ...

220 Frequently Asked Questions In Quantitative Finance What is a Free-boundary Problem and What is the Optimal-Stopping Time for ...

Chapter 2: FAQs 221 must also specify two conditions in the asset space. For example, a put option has zero value at infinite st ...