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 Copy Share Image
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… — John Hull Copy Share Image
The HoLee model was the first term structure model. I remember reading their paper soon after it was published and as it was fairly… — John Hull Copy Share Image
Alan White and I spent the next two or three years working together on this. We developed what is known a stochastic volatility model.… — John Hull Copy Share Image
Briefly speaking, our conclusion is that stochastic volatility does not make a huge difference as far as the pricing is concerned if you get… — John Hull Copy Share Image
Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model. — John Hull Copy Share Image
We concluded that you cannot rely on delta hedging alone. It sounds simplistic to say that now, but back then, this was the sort… — John Hull Copy Share Image
We started giving presentations at practitioner conferences in 1986, and since then all of our derivatives research has been stimulated by contact with practitioners. — John Hull Copy Share Image
Our research led on to other things, such as the fact that exchange rates are not lognormally distributed. — John Hull Copy Share Image
There are challenges in terms of the measurement of VAR for what are known as nonlinear derivatives, where things like gamma and vega are… — John Hull Copy Share Image
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,… — John Hull Copy Share Image
Yes, our tree has an interesting shape. The center branches reflect the shape of the zero curve. When extreme parts of the tree are… — John Hull Copy Share Image
