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 thing people were only just beginning to realize. John Hull backbeginconclude Change image and share on social
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 accommodatebranchcenter share on social
I guess any simple idea that is really good will catch on quickly. John Hull catchgoodguess Change image and share on social
I think VAR is a very healthy development within the industry. John Hull developmenthealthyindustry Change image and share on social
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 averagedependdirection share on social
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. John Hull challengederivativedimension Change image and share on social
Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model. John Hull findholeeincorporate Change image and share on social
I didn't become interested in derivatives until 1982, 1983. John Hull derivativeinterest Change image and share on social
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 alanassetdevelop share on social
