Just back from the seminar. No news fromMathematica, which keeps
being the same powerful gadget, only that now you can call it
from Excel.
But very interesting talks come from William Shaw, at Nomura Q.A.
He come with an example where implied volatility becomes so unstable
that it is undefined, just working out a binary option and seeing how
there is different phases depending if the price is above or
below the strike.
His philosophical introduction traced the stability problems to the
undefinition of the inverse function theorem in a discrete world
as this one is. I consider this view very important. I guess that
if worked out, it should imply that finance must be worked just as
other areas with "divergencies", where inverse functio is implemented
via perturvative series, the map from runge kutta to trees then to
feynman diagrams etc... Just wait five or six years :-)
Yours,
Alejandro Rivero
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