### American π: Piece of Cake?

An American option can be exercised by its holder at any time he wishes, not just at the expiration date. Textbooks tell you that pricing it in the context of the binomial model is a […]

An American option can be exercised by its holder at any time he wishes, not just at the expiration date. Textbooks tell you that pricing it in the context of the binomial model is a […]

Back to first principles… Leonard MacLean and Bill Ziemba Financial decision making is typically concerned with the amount of investment capital to allocate to various assets or asset classes in various financial markets. The opportunity […]

Implied volatility approximations atop the Devil’s Tower – Mike Staunton The 1977 science fiction movie Close Encounters of the Third Kind was written and directed by Steven Spielberg. The title is derived from the classification […]

Issues and approaches to measure and assess model risk when building quant models. With model failures leading to some high-profile financial accidents in the past few years, there has been a renewed emphasis to systematically […]

Ruination leads to enlightenment; tough, but true – Aaron Brown The term “gambler’s ruin” is used fora number of statistical ideas whose common denominator is predicting the eventual outcome of a series of repeated bets. […]

The formalism of Black–Scholes–Merton knows of no such thing as the past or the future. When it models the stochastic process of the underlying asset price as Brownian motion and symbolizes its volatility by σ, […]

The sensitivities of the value of an option to the model parameters, a.k.a. “the Greeks,” are crucial to understanding the risk of an option position, as well as tasks such as model calibration. Outside a […]

What is the PRC? The product risk classification (PRC) is a risk indicator that is based on quantitative models. It allows us to compare the financial risk of investment products of different kinds and asset […]

In the following, I will say what the smile problem is, and I am not sure everyone will follow me. This is how deeply and how long I’ve been thinking about the smile problem. I’ve […]

Tsachi Galanos of Bookmap describes the firm’s novel solution to Limit Order Book Visualization and analysis Roughly two years ago, we shifted our company’s focus from proprietary trading activity, dealing mainly with HFT algorithms, to […]

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