Is there anyone who can introduce the whole procedure of financial modeling? As far as i know, one may follow the steps below:
1. Deside the payoff of the due asset in paticular events.
2. Find out the related parameters and the variables.
3. Find the ODE/PDE/SDE formular for the variables and build up a model.
4. Calibrate the parameters with market data in the market model (ex B-S).
5. Use the parameters calibrated into the model.
6. Test the model.
Don't know whether it's correct and be eager to find some detaild description to every step.
FEer from China
1. Deside the payoff of the due asset in paticular events.
2. Find out the related parameters and the variables.
3. Find the ODE/PDE/SDE formular for the variables and build up a model.
4. Calibrate the parameters with market data in the market model (ex B-S).
5. Use the parameters calibrated into the model.
6. Test the model.
Don't know whether it's correct and be eager to find some detaild description to every step.
FEer from China