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.

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.

The principal rule of art is to please and to move. All the other rules were created to achieve this first one.

All enterprises that are entered into with indiscreet zeal may be pursued with great vigor at first, but are sure to collapse in the end.

Let me first state that I believe that marriage is a sacred union between one man and one woman.

Entropy theory is indeed a first attempt to deal with global form; but it has not been dealing with structure. All it says is that a large sum of elements may have properties not found in a smaller sample of them.

There is no need to do any housework at all. After the first four years the dirt doesn't get any worse.

The avantgarde are people who don't exactly know where they want to go, but are the first to get there.

I never taste the wine first in restaurants, I just ask the waiter to pour.

After the first miscarriage, I tried to take the attitude that it was my body's way of telling me that this pregnancy wasn't meant to be.

Before and during the first phase of the war his administration repeatedly maligned the UN but now, that Iraq has turned into a quagmire, it is asking the UN for help.

You look at the whole Human Rights questions, I happened to be there at just the right time when the country was awakening - this goes to the first question you asked - the whole country was awakening to a hundred years of injustice that hadn't been resolved yet.

So, first you have to be able to play with a metronome. Then you take your freedom. If you play in an orchestra, you got to watch the conductor, he is like a metronome, but it is more difficult because he can change rhythms.

My first figure was a SLAYER eagle. And the dragons and the tribals are all I have got.

We're parents first, and once you have kids, everybody knows that you have priority lists. Number one is your family and everything else just kind of finds its place.

Everything has to be pulling weight in a short story for it to be really of the first order.

But in the first Gulf war the United Kingdom was not under any threat from Iraq, and is still less so in the second one. Then there is no justification for obstructing freedom of information, particularly as nations have a right to know what their soldiers are being used for.

I sort of understood that when I first started: that you shouldn't repeat a success. Very often you're going to, and maybe the first time you do, it works. And you love it. But then you're trapped.

Working-class Americans have waited too long, close to a decade in fact, for an increase in the minimum wage. This has been the second longest period without a pay raise since the Federal minimum wage law was first enacted in 1938.

The first thing you do when you get out to center field is put up your finger and check the wind chill factor.

Christians must be Jews. The truth of what we believe depends on the truth of Judaism, depends on the first covenant.

The international proletariat first appeared on the scene in the early Thirties of the nineteenth century, and its first great action was the French Revolution of 1848.

Success requires first expending ten units of effort to produce one unit of results. Your momentum will then produce ten units of results with each unit of effort.

I want to be the first lady to land a quadruple jump in competition. As I grow older, I know that my skating style will develop and mature.

I bought my first camera in Seattle, Washington. Only paid about seven dollars and fifty cents for it.

Let the one among you who is without sin be the first to cast a stone.

Obviously I faced the possibility of not returning when first I considered going. Once faced and settled there really wasn't any good reason to refer to it.

You know why there's a Second Amendment? In case the government fails to follow the first one.

I think the theme of the album probably was just that it was our first record.

Similarly, the problem of the rights of the state in the disposition of inheritances left by individuals presents social aspects of the first importance.

Thus first of all in His own person He sanctified, restored, and blessed human nature.