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; another version of the same model for caps and floors; and yet another version of the same model for European swap options.
More Quotes from John Hull:
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.John Hull
I guess any simple idea that is really good will catch on quickly.
John Hull
Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model.
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.
John Hull
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.
John Hull
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.
John Hull
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Based on Keywords: caps, floors, swap, tradersDo not keep on with a mockery of friendship after the substance is gone - but part, while you can part friends. Bury the carcass of friendship: it is not worth embalming.
William Hazlitt
Parents provide their children with genes as well as an environment, so the fact that talkative parents have kids with good language skills could simply mean that and that the same genes that make parents talkative make children articulate.
Steven Pinker
I mean I think children love the idea that there are different viewpoints and different words for things and different worlds. And the more that they pretend to be other people, the harder it is for them to hate them and misunderstand them when they grow up.
Samuel West