Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model.

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.

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.

Our starting point then was trying to find a way to incorporate mean reversion into the HoLee model.

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.

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.

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

I think VAR is a very healthy development within the industry.

Alan White and I spent the next two or three years working together on this. We developed what is known a stochastic volatility model. This is a model where the volatility as well as the underlying asset price moves around in an unpredictable way.

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.

Our research led on to other things, such as the fact that exchange rates are not lognormally distributed.

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.

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.

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

We started giving presentations at practitioner conferences in 1986, and since then all of our derivatives research has been stimulated by contact with practitioners.

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.

There are challenges in terms of the measurement of VAR for what are known as nonlinear derivatives, where things like gamma and vega are important dimensions of the risk.

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.

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.

When interest rates are high you want the average direction in which interest rates are moving to be downward; when interest rates are low you want the average direction to be upward.

Androgyny is not trying to manage the relationship between the opposites; it is simply flowing between them.

We're all like children. We may think we grow up, but to me, being grown up is death, stopping thinking, trying to find out things, going on learning.

I am playing with the assumptions that we have in our everyday life when we are tripped up or fooled and we learn something, that makes things exciting - I am having fun with that stuff, but you have to manage it so it doesn't get too cute, that's what I trying to work toward.

'Thou shalt not get found out' is not one of God's commandments; and no man can be saved by trying to keep it.

Well, I think that those of us in public life that are trying to do a good job, and that are faced with this popular new game that the media has of being critical of everything that anybody in public office does probably are thin-skinned.

When Frank the Pug is singing I Will Survive, the only reason it's funny is that Will is in that shot trying not to get angry. A shot of a dog singing I Will Survive on its own will not get a laugh.

I sometimes lie awake at night trying to think of something funny that Richard Nixon said.

Votes are like trees, if you are trying to build a forest. If you have more trees than you have forests, then at that point the pollsters will probably say you will win.

I'd been trying for all of the eight years we'd been married to have a child, and finally I did.

Yeah; I'm a much better blues player than anybody knows, but being in the kind of group I'm in, we were always trying to make popular records.

Uhm, I'm the one wanting the lessons! I don't want to say too much about it because I'd rather have you see the movie, but he's trying to find his music.

So my idea of neurotic is spending too much time trying to correct a wrong. When I feel that I'm doing that, then I snap out of it.

I've always done food that can work in a set time frame. The message I'm trying to get across is, it doesn't have to take three days to do this. With planning, you can do a lot and really have quality food every day.

I meditate a lot, but I am constantly in pain. I'm trying to live with this. You just have to accept it.

I trained and trained and went up against Kurt, then being a world champion in '94, and after that I did Tommy's tour and then my tour and all this stuff and just trying to deal with it all. And now, I've just kind of backed off a little.

You feel the music needs something but you don't know what. So you start searching, fitting, measuring, trying. Every time you try another angle. And sometimes that's frustrating, especially if you don't come up with something for three days.

Trying to give back a little bit is important.

Intimacy comes from being yourself on the stage and making the audience feel, without trying, that you're sittin' down there with 'em, playing, and that can happen in a big hall, if you have a good audience that want to listen.

While advances in scientific research have led to some new and exciting treatments that have enlarged and enhanced the quality and length of human life, we must not lose sight as to what we are trying to accomplish.

Playing polo is like trying to play golf during an earthquake.

Orlando's a part of me. The next guy's a part of me. And the next guy's a part of me. That's all I'm trying to do, is tell cool stories that people can relate to.

In modelling, there is no point in trying to prove you have a brain, so why even bother? I'd sooner save the energy for something more meaningful.

I have spent more than half a lifetime trying to express the tragic moment.

I mean, I don't know anything else that I would try to do, but it's a very frustrating thing to do, because you are trying to take what's a fantasy in your head and make it live through the minds of 200 people.

My lyrics come from my experiences growing up in life, trying to find out and express who I am. That's basically it. I'm not trying to be a prophet or anything like that. I'm just reflecting on life.

My back to the goal, physically fighting off defenders, trying to bang my goals in, every week I have to do the business for this club. That's the life of a striker.

I enjoyed high school and college, and I think I learned a lot, but that was not really my focus. My focus was on trying to figure out what businesses to start.

I just have my own taste, and I just try and stick with that. I'm just trying to play as many characters as I can for as long as I have an opportunity to.

James Joyce was a synthesizer, trying to bring in as much as he could. I am an analyzer, trying to leave out as much as I can.