John Hull Quotes
19 quotes
in 349 categories
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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…
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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…
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I guess any simple idea that is really good will catch on quickly.
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I think VAR is a very healthy development within the industry.
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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, because…
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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…
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Our research led on to other things, such as the fact that exchange rates are not lognormally distributed.
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Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model.
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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…
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The HoLee model was the first term structure model. I remember reading their paper soon after it was published and as it was fairly different…
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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…
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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,…
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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…
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We concluded that you cannot rely on delta hedging alone. It sounds simplistic to say that now, but back then, this was the sort of…
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We started giving presentations at practitioner conferences in 1986, and since then all of our derivatives research has been stimulated by contact with practitioners.
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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…
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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…
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I didn't become interested in derivatives until 1982, 1983.
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In the interest rate area, traders have for a long time used a version of what is known as Black's model for European bond options;…
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