Perhaps the most convenient fiction in financial modelling is the assumption that markets trade in continuous time, with asset price processes solving stochastic differential equations (SDEs). The assumption is as old as the subject itself, having begun with Louis Bachelier formulating his Brownian motion model in 1900, five years before Einstein discovered it in physics.
The trouble comes when an attempt is made to capture this in the inherently discrete world of the computer. Whether it is Mon
The week on Risk.net, October 6-12, 2017Receive this by email
- Quantile, TriOptima face off in cleared swaps compression battle
- SGX, HKEX expect to be among first wave of Mifid II equivalence
- Leaked EU doc could shield legacy swaps from clearing grab
- ABS set for revival under US Treasury’s liquidity buffer plans
- Quants stymied by lack of alternative risk premia flows data