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 you are saying that there are only two possible outcomes. John Hull longmodeleoutcome 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
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 sort of different type of problem. John Hull interestmodelenumb 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
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
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 averagebigbriefly share on social
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
I guess any simple idea that is really good will catch on quickly. John Hull catchgoodguess Change image and share on social
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 from many of the other papers that I had read, I had to read it quite a few times. I realized that it was a really important paper. John Hull fairlyholeeimportant share on social
