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. John Hull Read Quote
Our research led on to other things, such as the fact that exchange rates are not lognormally distributed. John Hull Read Quote
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. John Hull Read Quote
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. John Hull Read Quote
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. John Hull Read Quote
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. John Hull Read Quote
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. John Hull Read Quote
We started giving presentations at practitioner conferences in 1986, and since then all of our derivatives research has been stimulated by contact with practitioners. John Hull Read Quote
