Although the cold war is over, "rocket" scientists are hard at work extending and elaborating fixed income contingent claims models for evaluating embedded options. While option-modeling technology has become very advanced and useful, a body of cant, which can befuddle the unsuspecting practitioner, also surrounds it. In this article, three observations are explored: volatility is the most important model parameter; even bad models can be tuned to give good results for the most simple options, and; good models are good because they work over a wider range of options.
Publication:
Authors: LOCHOFF Roland
