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.

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.

I don't like being recognised, I have no interest in being famous at all, I just do what I do. If I could be like Captain Kirk and beam myself up and then beam myself down, I would!

Judaism has always been a strong interest of mine. My two sons speak Hebrew and are familiar with the scriptures and with rabbinic literature. This is the way we live.

It is the interest one takes in books that makes a library. And if a library have interest it is; if not, it isn't.

I'm thinking of going to programming school. Learn how to sit down at any computer and learn to do anything on it. That's all I have left and have interest in.

I don't have a strong interest in history.

I'm not up on today's television for children, because it's mostly cartoons that don't seem to interest me.

It was clear that the special interest groups in California really wanted the Chinese to be shut out of the country, because that was where the racial tension was the greatest.

I think that the quality of all bands is steadily improving and it is a pleasant thought to me that perhaps the efforts of Sousa's Band have quickened that interest and improved that quality.

Warren Beatty took an interest in my career at one point.

Neither these statesmen nor their constituents sought in any way to use the Government for the interest of themselves or their section, or for the injury of a single member of the Confederacy.

I had given up the guitar between '75 and '78. I completely lost interest. I was sick of hearing other guitar players and I was tired of my tunes.

The government must do all it can to help reduce interest rates for business.

I went to the Academy and studied with Stuck who was then a big man. But didn't interest me. I didn't know that before me there was Kandinsky and Klee who had also studied with Stuck. He had a good name at that time.

I have no interest in sailing around the world. Not that there is any lack of requests for me to do so.

Pakistan has made no mention of ending our tests. We have a missile program, and it is in the national interest whatever we want to do.

A government for the people must depend for its success on the intelligence, the morality, the justice, and the interest of the people themselves.

Interest is the spur of the people, but glory that of great souls. Invention is the talent of youth, and judgment of age.

And when we draw lines in the sand with regard to certain basic things that are vital to our interest and to the interest of democracy and our friends around the world, we have to be willing to back that up.

However, when the privilege depends solely on the broad, undifferentiated claim of public interest in the confidentiality of such conversations, a confrontation with other values arises.

In precisely the same way money is often hired, and the hire paid for the use of it is called Interest.

I didn't have any interest in traditional art.

Yes, of course that's true but you know, the irony of all that is that before the accident, I'd pretty much lost interest in playing drums.

Having this interest here in the Redskins is the chief hobby of my life.

I never worry about diets. The only carrots that interest me are the number you get in a diamond.

Since the model he so faithfully copies is not going to be hung up next to the picture... it is of no interest whether it is an accurate copy of the model.

My legislation, the Simple Savings Tax Relief Act of 2005, simply eliminates the taxation of interest earned in savings accounts, such as passbook savings accounts or bank certificates of deposit.

Well, I think it's pretty much established that I just didn't have any interest in coaching in the pros.

Hors d'oeuvres have always a pathetic interest for me; they remind me of one's childhood that one goes through wondering what the next course is going to be like - and during the rest of the menu one wishes one had eaten more of the hors d'oeuvres.

Justice, sir, is the great interest of man on earth. It is the ligament which holds civilized beings and civilized nations together.