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"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."
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Explore more quotes by John Hull
"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."
"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."
"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."
"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."
"The real challenge was to model all the interest rates simultaneously, so you could value something that depended not only on the three-month interest rate, but on other interest rates as well."
"Alan White and I spent the next two or three years working together on this. We developed what is known a stochastic volatility model. This is a model where the volatility as well as the underlying asset price moves around in an unpredictable way."
"The problem with interest rates are that you are not modeling a single number, you are modeling a whole term structure, so it is a sort of different type of problem."
"Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model."
"Our tree is actually a tree of the short-term interest rate. The average direction in which the short-term interest rate moves depends on the level of the rate. When the rate is very high, that direction is downward; when the rate is very low, it is upward."
"Our research led on to other things, such as the fact that exchange rates are not lognormally distributed."
Exlpore more Extreme quotes
"Extreme remedies are very appropriate for extreme diseases."
"I am not a tree-hugger and I don't think mine is an extreme point of view."
"The Greeks said very, very extreme things in their tragedies."
"Combine the extremes, and you will have the true center."
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