May
21
Amazon Kindle is a software and hardware platform for reading electronic books developed by Amazon.com, few days ago a friend of mine told me Amazon had a new service called Kindle blog, which gives a blogger chance to publish his or her blog at Amazon for free. Since nothing to lose by exposuring a blog to one of the world's largest websites, I submitted immediately and 10 minutes ago found my blog was successfully listed at Amazon Kindle
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I intent to make it free but I am not allowed to do so, Amazon automatically sets the Monthly Price at $0.99 and includes wireless delivery via Amazon Whispernet, nevertheless, blog subscription starts with a 14-day free trial, and you can cancel at any time during the free trial period. (I double checked the publisher's policy, Amazon will charge 70% of subscription fee while bloggers receive the left 30%, that is to say, I earn only $0.297 per subscription.)
I don't expect people to subscribe my blog via Amazon Kindle as it is totally free on web, however, if you happen to use Kindle and would like to buy me a 1/5 bottle of Beck's beer, I will be pleased
.
Check it out at http://www.amazon.com/gp/product/B0029U2FQ6
.I intent to make it free but I am not allowed to do so, Amazon automatically sets the Monthly Price at $0.99 and includes wireless delivery via Amazon Whispernet, nevertheless, blog subscription starts with a 14-day free trial, and you can cancel at any time during the free trial period. (I double checked the publisher's policy, Amazon will charge 70% of subscription fee while bloggers receive the left 30%, that is to say, I earn only $0.297 per subscription.)
I don't expect people to subscribe my blog via Amazon Kindle as it is totally free on web, however, if you happen to use Kindle and would like to buy me a 1/5 bottle of Beck's beer, I will be pleased
Check it out at http://www.amazon.com/gp/product/B0029U2FQ6
May
20
This is a follow up post of my previous entry Nine Ways to Implement Binomial Tree Option Pricing because the latter covers European option only. Compared with pricing American option by Crank-Nicholson finite difference or American Options via least square Monte Carlo Simulation, Binomial tree is the easiest to implement, what you need to do is just adding a MAX expression on every node of your tree.
Here is a paper on the implementation of binomial tree methods for the pricing of American option' value and Greeks, matlab codes can be found in the paper or separately here.
Here is a paper on the implementation of binomial tree methods for the pricing of American option' value and Greeks, matlab codes can be found in the paper or separately here.
May
19
Unlike launching rocket, managing risk is a combination of art and science that should incorporate a number of fundamental characteristics. This post is by no means another ex post analysis of the reasons of current credit crisis, instead, it is about eight simple while crucial rules a risk manager or risk analyst must keep in mind (print out and post it on your PC). Sources are from http://www.geocities.com/mrmelchi/rule.htm and http://nasdaq.riskgrades.com/clients/nasdaq/edu_course.cgi?href=Module4-L2.html.
1.There is no return without risk. Rewards go to those who take risks.
2. Be transparent. Risk should be fully understood.
3. Seek experience. Risk is measured and managed by people, not mathematical models.
4. Know what you don't know. Question the assumptions you make.
5. Communicate. Risk should be discussed openly.
6. Diversify. Multiple risks will produce more consistent rewards.
7. Show discipline. A consistent and rigorous approach will beat a constantly changing strategy.
8. Use common sense. It is better to be approximately right, than to be precisely wrong.
Quotation
1.There is no return without risk. Rewards go to those who take risks.
2. Be transparent. Risk should be fully understood.
3. Seek experience. Risk is measured and managed by people, not mathematical models.
4. Know what you don't know. Question the assumptions you make.
5. Communicate. Risk should be discussed openly.
6. Diversify. Multiple risks will produce more consistent rewards.
7. Show discipline. A consistent and rigorous approach will beat a constantly changing strategy.
8. Use common sense. It is better to be approximately right, than to be precisely wrong.
May
18
Binomial tree model is almost the most popular yet easiest way for option pricing, for one thing, it can be used for most option classes in market, for example, European option, American option, Bermuda option, etc.; for another, Binomial tree is straitforward to implement, several lines are enough for a vanilla option. Besides, it has a not-bad convergence speed, read my old post A Simple Trick to Avoid Oscillation in Binomial Trees for improvement.
But how many ways are you able to implement binomial trees? here is a pretty interesting paper on Nine Ways to Implement Binomial Tree Option Pricing, unlike Mr. espen haug's more than 30 languages collection of Black Scholes model, these nine ways are all runnable in Matlab only, and the difference among them is computational efficiency, below is a plot of execution times of the first five
here are the paper and matlab codes, you might feel in the end binomial tree implemention is not such easy.
Enjoy.
But how many ways are you able to implement binomial trees? here is a pretty interesting paper on Nine Ways to Implement Binomial Tree Option Pricing, unlike Mr. espen haug's more than 30 languages collection of Black Scholes model, these nine ways are all runnable in Matlab only, and the difference among them is computational efficiency, below is a plot of execution times of the first five
here are the paper and matlab codes, you might feel in the end binomial tree implemention is not such easy
Enjoy.
May
16
No bigger news recently than Wolfram Alpha computational knowledge engine is finally available today, on 10/03/2009 I briefly wrote a post about what is wolfram alpha engine and what can it be used to service us, immediately after that, I applied to be a volunteer tester but got no reply. Anyway, it officially opens to public and we have chance to test its magic.
When talking about the pros and cons of Wolfram Alpha engine and Google, different people will offer different opinions, some people take it for granted that Wolfram Alpha will be a big threat to Google and eventually replace Google, however, others hold that Wolfram Alpha is just a computation calculator, and no matter how powerful it is, it is at most a calculator with search function. Weighing up these two arguments, I would say they complement each other, for example, before you calculate an Europen option with Wolfram Alpha computational engine, you need to google at least what an Europen option is.
In my previous post I joked about if Wolfram Alpha would return a result of "Black Scholes call option price with strike 10, asset price 10, time to maturity 1 year, interest rate 3%, and 25% annual volatility", alright, it turns out to be YES, just type "Black Scholes", you will get a form similar to the following graph
When talking about the pros and cons of Wolfram Alpha engine and Google, different people will offer different opinions, some people take it for granted that Wolfram Alpha will be a big threat to Google and eventually replace Google, however, others hold that Wolfram Alpha is just a computation calculator, and no matter how powerful it is, it is at most a calculator with search function
In my previous post I joked about if Wolfram Alpha would return a result of "Black Scholes call option price with strike 10, asset price 10, time to maturity 1 year, interest rate 3%, and 25% annual volatility", alright, it turns out to be YES, just type "Black Scholes", you will get a form similar to the following graph
