Questions about models for the valuation of option contracts.
4
votes
1answer
721 views
Simple model for option premium (for covered call simulation)?
Given a historical distribution of weekly prices and price changes for a stock, how can I estimate the the option premium for a nearly at-the-money (ATM) option, say with an expiration date 3 months ...
9
votes
5answers
3k views
What is the implied volatility skew?
I often hear people talking about the skew of the volatility surface, model, etc... but it appears to me that a clear standard definition is not unanimously in place among practitioners.
So here is ...
5
votes
1answer
348 views
Extensions of Black-Scholes model
For the Black-Scholes model my feeling is that the volatility parameter is like sweeping stuff under the rug.
Are there models which improve on the volatility aspect of Black-Scholes by adding other ...
6
votes
1answer
402 views
How to use binomial tree for portfolio of equity products
How can I use a binomial tree to price a European option that's based on a portfolio of equity products? I have volatility and correlation matrix of all underlying products?
Looking for a formula ...
11
votes
6answers
2k views
Probability of touching
For a vanilla option, I know that the probability of the option expiring in the money is simply the delta of the option... but how would I calculate the probability, without doing monte carlo, of the ...
18
votes
0answers
461 views
How to show that this weak scheme is a cubature scheme?
Weak schemes, such as Ninomiya-Victoir or Ninomiya-Ninomiya, are typically used for discretization of stochastic volatility models such as the Heston Model.
Can anyone familiar with Cubature on ...
11
votes
1answer
747 views
How do I price OANDA box options?
How do I price OANDA box options without using their slow and
machine-unfriendly user interface?:
http://fxtrade.oanda.com (free demo account) sells "box options":
If you already know what a ...
23
votes
4answers
947 views
Are there any new Option pricing models?
Back in the mid 90's I used the Black-Scholes Model and the Cox-Ross-Rubenstein (Binomial) Model's to price Options. That was nearly 15 years ago and I was wondering if there are any new models being ...
10
votes
7answers
2k views
Why does implied volatility show an inverse relation with strike price when examining option chains?
When looking at option chains, I often notice that the (broker calculated) implied volatility has an inverse relation to the strike price. This seems true both for calls and puts.
As a current ...
