A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.

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6
votes
3answers
402 views

Replicating portfolio and risk-neutral pricing for interest rate options

For equity options, the pricing of options depends on the existence of a replicating portfolio, so you can price the option as the constituents of that replicating portfolio. However, I am not seeing ...
5
votes
2answers
261 views

Pricing options under restricted domain

How would I price an option when the underlying security is unable to trade above a certain price? I assumed this would be as simple as restricting the limits of integration of the PDF to B (the ...
2
votes
1answer
46 views

Data Selection for Empirical Pricing Kernel Estimation (Stochastic Discount Factor)

I want to estimate an empirical pricing kernel for an index. Hence, I need to estimate a physical and risk neutral density. For estimating the physical density, only the index data in an observed time ...
1
vote
1answer
58 views

Historical Implied Volatility Calculation

I'm trying to calculate implied volatility for the FTSE 100 for the last few years. I have all the end of day data from LIFFE for the last few years. I have combined the data by weighting the ...
0
votes
1answer
45 views

Which interest rates to use for options pricing?

I am looking at the historical treasury interest rates and am uncertain which rates would be best to use for options pricing. Should I use 1 month, 6 month, 2 year? See: ...
0
votes
1answer
62 views

is Sum of P&L equal to portfolio value

For a portfolio containing FX options, would the sum of P&L for each option be the portfolio value?
0
votes
1answer
80 views

Moneyness and option prices

I'm attaching stock prices from CRSP to a dataset of option prices in order to compute the option moneyness. I'm wondering whether I should adjust the underlying prices taking into account splits and ...
0
votes
1answer
31 views

negative probabilities in the bivariate tree heston model

I am trying to implement the bivariate tree approach for the Heston model by Beliavea & Nawalkha. I currently have the problem that given the specifications in their examples, I always obtain ...
0
votes
0answers
136 views

What are the theta and vega of a forward starting plain vanilla european option with no dividend?

I am reading through Hull's book asking myself this question to understand exotics. I currently believe that theta should equal 0 until the forward start time, $t_*$, if the call pays no dividends. ...
0
votes
0answers
145 views

Monte Carlo American Option Pricing under GARCH(1,1) volatitliy

I am attempting to price a couple of at-the-money American option using the LSM algorithm and GARCH(1,1) volatility. The LSM code I have works correctly for constant volatility, however, when I switch ...
0
votes
0answers
124 views

“Real” DMA to Options Markets

I'm looking for a broker with DMA to large options markets (CME, ISE, CBOE). Broker should be HFT friendly, i.e. offer fast API, low fees for huge amount of trades and so on. Price is not an issue. ...
0
votes
0answers
207 views

CME historical option data provider

Is there any other historical end-of-day CME option data provider rather then CME DataMine? I've searched all the internet and found only CBOE traded options.
-1
votes
0answers
28 views

How much less likely is a stop loss to be touched/hit after increasing expected return?

Firstly, let's say we have a stock ABC currently trading at $100.00 that has: (A) an expected return of 0% per year and (B) standard deviation of 20% per year Given these stats, the stock has a 50% ...
-1
votes
0answers
32 views

How to calculate implied volatility of an american call option in excel VBA?

I am looking for a macro which calculates the implied volatility of an american option in excel. My approach is to use secant method with lower bound of zero and upper bound as IV of european call ...