Measuring instantaneous variance of SPX with VIX and the Heston stochastic volatility model
- Thread starter stochastix
- Start date
whats that got to do with the price of eggs in china? so you think its all Gaussian? stochastic volatility has nothing to do with gaussian. Python is a shit hacked together language not good for much of anything besides sending automated emails and whatnot. are you still hung up on trying to do point predictions or linear extrapolation of series beyond the present?Any blackbox method is doomed to failure if you dont know whats in the box and what its doing or why
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You were railing about attempting parametric use of non-stable/dis-continuous data stemming from stochastic processes, esp. wrt financial markets. I made the mistake of chiming in; I'll avoid such posts in the future.
I appreciate the warnings but I know how to do statistics without the IID assumption, looking for structural breaks, irregularly spaced time data, etc. diagnostic and residual testing, autocorrelation, etc. See https://www.readcube.com/articles/10.2139/ssrn.3514894 for instance where the continuous time model fits all the prices almost perfectly. I dont see the problem, I got a good fit for the stochastic volatility model... stochastic optimal control theory is very powerful, as is the associated Hamilton-Jacobi-Bellman equations and concept of viscosity solutions, etc. Point forecasts are useless, all forecasts have to be probabalistic otherwise they dont mean anything, since a point has 0 measure. But I get ya... some physisicsts have went so far as to say calculus is invalid and there is no continuum
Thanks for that book recommendation. The authors writing style is interesting. I was explaining to my dad how we were basically selling insurance to people looking to hedge against a drop in the SPX. he didnt understand how.. I said we earned the premium by selling the options, if they expire by the 15th, we have no pending liability and keep the premium. He couldnt comprehend an option on a volatility index since you cant trade the underlying. so he says, its all gambling.. and for us to win someone must lose? I dont know. whoever bought the option got their value in the protection they receive. he still buys lotto tickets occasionally even though the odds are so bad
Meh.
You two do realize that you've killed an applied math/methods thread just to play with each other, alone?
Have at it, boys.
You two do realize that you've killed an applied math/methods thread just to play with each other, alone?
Have at it, boys.