Quote:
Originally Posted by Unregistered
i read the book 2 continuous stochastic modelling - for a engineer/scientist, it seems so intuitive to think asset prices as a stochastic variable - just like white noise with added drift in my DSP processing... well honestly it quite heavy stuff to me towards the end when it talks abt the fwd libor model - and also trying to extend it to american expiry pricing with poisson jump process for credit event - seems eventually a numerical method is required mm... a bit blur not sure how to solve real finance problem given by my friend.... hehe
anyway, i think i still lack market knowledge especially on the implied vol stochastic modelling.. it seems quite to voodoo science to me, prob might be some serious money making strategies for hedge funds i guess...
Well bloomberg machine not within my 200m radius doesnt help
|
forward libor - use change of numeraire.
jumps are too complicated to solve analytically without making ridiculous assumptions so probably numerical.