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for empirical option pricing check out Bouchaud's "Theory of financial risk". good book and has a chapter on "hedged MC". i think its a gd starting point. i have implemented it, and it works.

i like two-factor lognormal stoch vol with jumps. "immature market" does it mean there is no bid if SPX craters 100 points? what market are you looking at? i think his trying to make a shipload of money

i think in-the money calls will give you decent ROE. obv more leverage will cost u in TV decay.

not big expert on this. but i use ADO to get data then manipulate it at VBA level and dump on spreadsheet. if u google for ADO u get tons of ref to get u started

it probably was a cost efficient solution for a corporate client. right Bob?

usually if you are covered by IB then u can ask ur sales rep. even if u trade other asset class with them. GS and JMP are pretty gd. pretty sure if google a bit for Krag Gregory u will find some strat reports.

Tsotne, as most of this stuff is not liqd as financeguy said i think it makes sense as a theoretical exersise to focus on the dynamics as implied by ur dependence specification than actually matching some price? it would very important for u to understand how these dynamics will ultimately...

wonder when DOJ will go after internet gambling company Etrade.

relative pricing and replication pricing is not the same thing. sure you can put a level on the 3y zero from the constructed forward curve, then u still need to figure out how to hedge ur position.

if i understood ur question right you would like to replicate cash flows of the 3y zero with coupon bonds. Ideally you want that tennors of the cash flows match. suppose you have: b1 1y zero b2 2y 6% coupon annual b3 3y 8% coupon annual then holding long 93% of b3 and short 7% of b1 and short...

just one more for those that hvnt seen that yet. http://www.ederman.com/new/docs/risk-its_all_greeks_to_me.pdf

so is his email.

lol i am light years away from kwantdaddy. he is a great quant

http://www.linkedin.com/in/kwantdaddy

i think so as well. if poker sites were concerned then in cash games they make everybody play 100bb deep. but i observed that short stacked tables are very active, and a perfect spot to run a bot with minimal postflop play.

next thing you know Tsotne you gonna try to beat GS VWAP algo

http://www.codingthewheel.com/archives/how-i-built-a-working-poker-bot

http://www.pokerstars.com/poker/room/prohibited/ There are few instances that i am aware of that funds were confiscated. Online poker is very competitive business. Many players have same backing arrangements, share hand histories (work of a single database), work from same location, and work...

http://en.wikipedia.org/wiki/Gambler's_ruin

i dont think Buffet is hedging, prly got his forward at 4000 for SPX. he is the type of guy that would sell HY equity at 90c and use it go long WFC.

BM brownian motion, EV expected value, VAR variance. you can use this paper http://www.cmegroup.com/trading/fx/files/michael_parkinson.pdf

i think that in case of BM range is approx log-norm dist. u can match EV and VAR and get formula for ur digital or u can always do MC or u might be able to approximate this payoff with digitals. range dist comes up often in vol estimation. if you google range distribution for BM ull get enough...

In you situation i would seriously consider options due to the leverage they provide. even if you gonna get lucky you can get 10:1 or better for risking 10% of ur equity. Earnings season is coming, things are volatile, get ready, look for jumps and be lucky. check out URBN for example. couple...

www.defaultrisk.com has lots of ref for your review. i am familiar with the topic. if you can let me know what you want to research i can provide more info. Barcap/ML/JP have very good guides. also check http://www.quantcode.com/

http://www.google.com/finance/option_chain?q=NYSE: DIA exmple (buy 119 put sell 118.75 put)/.25 thats prty close to binary. u can find more with weeklys in most liquid names

DIA scaled c/p spreads might be what u look for

hm interesting. i guess the only useful file is credit summary with all net longs/shorts for bofa credit business. but u can print out those dv01s by book with associate tickers. :)

you can always write ur own function with a discretisation(if spd is not relevant then euler will work with very small timesteps) of the SDEs. http://ta.twi.tudelft.nl/mf/users/oosterle/oosterlee/SABRMC.pdf

1. http://www.finmod.co.za/3assetrainbow.pdf u can always do MC(with control variate) if they want just number. since they made 3rd stock independent i think they want u to use it as numeraire and to work out formula. then u need to do few dble integrals and ur answer will look similar to...

my 2c. i think all of ans u can find on web. 2. need to clarify what u mean by corr 25% (event correlation or factor loading in GC) 4. first hitting time of BM tons of ref on web. 5. standard app of Bayes 6/7 straight forward just do the calcs. 8. 1 0 p sqrt(1-p^2) 9. plug in bs check for...

u can do MC or googl rainbow options for tons of refern. for max(s1,s2) is spot+margrabe. for three u can measure payoff in units of independent stock(change of numeraire), than ur payoff is bestof two assets and cash. pretty sure there is formula for that. u can check Haug.

another possibility is that it is PnL from existing position. Total end of day PnL could be split in PnL from existing positions(risk PnL) + PnL from new trades (which could add 0 to total risk)

hey 99% confidence interval(for win rate if ur trades r iid with 2000 trades) is aprx [55%,61%]. u can check distribution of runs vs iid. at higher freq i think it makes sense to increase ur sample size to 10000+ to get better bounds and check convergence.

i can differentiate and integrate and know few limit theorems. i would start with random walks and get know it gd. do some MC look at applications to games of chance. i think that fellers books vol1 vol2 are excellent. there is also great book by karlin on stoch process.

i started learning with Feller's Intro to Probability and Sheldon Ross's Prob Models then upgraded to shreve vol2.

great article. thnx. in his other paper there is even greater quote. “So there's an arbitrage. So what? This desk has lost a lot of money on arbitrages. Arbitrages aren't particularly great trades.” -Treasury bond trader at a major Wall Street investment bank

sure Sanket i know what u mean. but if u have to own bond to buy cds u would prbly would have to own bond to swap away some of the risk via asset swap and both types of cotracts would prbly be subject to same regulations. i think it is interesting how they will margin cds(in order to reduce...

did i get it correct max?

in the case of corporate default u can use deep OTM puts to construct equivalent payoffs to CDS. but contractual language of CDS could include other credit events with respect to ref ob.

For a gd dose of pessimistic thinking I go to zero hedge | on a long enough timeline, the survival rate for everyone drops to zero

smile is captured in the prices of standard options. if ur exotic can be replicated with vanilas then price of the exotic will be equal to the price of replicating portfolio and be smile consistent. in some instances exotic cannot be staticly hedged and would require u to rebalance ur hedges in...

dnt want to sound arrogant or anything. i think SIG does value success in poker. but one win dsnt imply that u have edge over ur competition. variance is there and u can be on either side when it hits u (u can go to AC put all on red and win). from what i hear those games are hard, if u can beat...

joel wsnt reffering to success of any particular strategy, but rather once a favorable situation is found how to manage ur bet sizing in order to capitalize on +EV and not get ruined at the same time. in the situation with Infin i am amazed that risk didnt cap capital allocated to that...

lol idg. but Joy we are talking about different things here. i would rather flip a coin 1000 times at $1 as 4:1 favorite than once for $1000 as 4:1 favorite for the same price. unfortunately in life bad beats do happen often.

i definetely agree with you that volitile enviroment present opportunities. but in the context of the p&l distribution of trading strat i personaly wldnt think that its such a gd thing.

i am new to quant invest but my impresion that most of prop shops hate variance as much as i do. are very disciplined when it comes to capital at risk and very disciplined whith their bet sizing. reading this i say lol. i guess edge was so gd that risk realocated capital from other strats.

Hey, just recently joined this community. great job Andy. I am currently trying to understand the business structure of the options MM desk at IB or prop desk. What are the typical turnover rate of active position for a dealer in days(mid/large cap stocks)? To what extent vanillas trade...