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In this article we introduce a defined and repeatable process to analyze, design, and implement software systems using a combination of techniques taken from Structured Analysis and the object‐oriented programming style. We use top‐down system decomposition and bottom‐up programming techniques to create software systems. We also show how to leverage the new multi‐paradigm features in C++ to promote...
The analysis derives a set of constant coefficients, and shows that the implied volatility smiles are the same with the time‐dependent coefficients replaced by these constant coefficients.
Analysis of the standard SABR model leads to an effective forward equation which has time‐independent coefficients, and analysis of this reduced‐dimensionality equation leads to explicit asymptotic formulas for the implied normal volatilities of European options. These formulas are accurate to within O(ε2), and are used extensively in practice for pricing and managing the risks of European options...
Trading strategies that were profitable in the past often degrade with time. Since unlucky streaks can also hit “healthy” strategies, how can one detect that something truly worrying is happening? It is intuitive that a drawdown that lasts too long or one that is too deep should lead to a downward revision of the assumed Sharpe ratio of the strategy. In this note, we give a quantitative answer to...
In “The SABR Chronicles,” Patrick S. Hagan charts the development of the model from its inception as an introduction to “Managing Vol Surfaces” by Patrick S. Hagan, Andrew S. Lesniewski, and Diana E. Woodward.
The most radical AMG ever built could be yours by 2019 – but you'll need to get your order in now, along with a check for around $2.7 million, or miss out on a stunning powerhouse plugin electric hybrid that redefines automotive technology.
Porsche launches its most berserk and powerful 911 ever and neatly proves its dominance as the premier sports car builder by setting a lap record with it in a place called Hell…
In this paper, a new parametric model for the implied volatility surface of swaptions is introduced. It is based on the theoretical representation of local variance as bridge expectation of actual variance at expiry, and uses a specially tailored GARCH model to compute this expectation. The resulting model is calibrated to an extended swaption cube data example and extracts a discrete set of volatility...
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