John Hull Quotes

John Hull

Mathematician

Average Derivatives Important Long Measurement You

Related authors: Ada Lovelace Alfred North Whitehead Archimedes Charles Babbage Isaac Newton Katherine Johnson Pythagoras Rene Descartes

I didn't become interested in derivatives until 1982, 1983. John Hull

Become Until Interested Derivatives

I guess any simple idea that is really good will catch on quickly. John Hull

Good Simple Will Guess Simple Idea Catch Idea Quickly Any Really

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

Reflect Tree Changes Our Extreme Shape Reached Parts Accommodate Yes Branches Center Curve Pattern Interesting Mean Zero

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

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. John Hull

Time Black Long Long Time Rate Area Known Another Version Model Options Same Interest Swap Used Caps European Floors Bond

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 low. 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

Tree Our High Rate Direction Very Depends Moves Upward Which Short-Term Interest Low Average Downward Actually Level

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, but on other interest rates as well. John Hull

You Challenge Value Other Three-Month Rate Something Rates Only Could Simultaneously Well Real Model Depended Interest Interest Rates

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