#v

Sometimes in the dark of night I begin to think. And I wonder if Lee started all this violence. ↗

— Marina Oswald

#dark #i #i wonder #lee #night

Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get the average volatility right. It makes a big difference as far as hedging is concerned. ↗

— John Hull

#average #big #big difference #briefly #concerned

I didn't become interested in derivatives until 1982, 1983. ↗

— John Hull

#derivatives #i #interested #until

I think VAR is a very healthy development within the industry. ↗

— John Hull

#healthy #i #i think #industry #think

If each of your time steps is one week long, you are not modeling the stock price terribly well over a one-week time period, because you are saying that there are only two possible outcomes. ↗

— John Hull

#each #long #modeling #only #our time

In the interest rate area, traders have for a long time used a version of what is known as Black's model for European bond options; another version of the same model for caps and floors; and yet another version of the same model for European swap options. ↗

— John Hull

#area #black #bond #caps #european

One important measurement issue concerns the fat tails problem that I mentioned earlier. VAR is concerned with extreme outcomes. If the tails of the probability distributions we are using are too thin, our VAR measures are likely to be too low. ↗

— John Hull

#concerns #earlier #extreme #fat #i

There are challenges in terms of the measurement of VAR for what are known as nonlinear derivatives, where things like gamma and vega are important dimensions of the risk. ↗

— John Hull

#derivatives #dimensions #gamma #important #known

When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward. ↗

— John Hull

#direction #downward #high #interest #low

Yes, our tree has an interesting shape. The center branches reflect the shape of the zero curve. When extreme parts of the tree are reached the branching pattern changes to accommodate the mean reversion. ↗

— John Hull

#branches #center #changes #curve #extreme