# Tagged Questions

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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### VAR of portfolio containing options, equities and forwards

If we want to calculate VAR of a portfolio using variance covariance matrix (delta normal method), containing equities, forwards and options, how do we treat each asset class for making the variance ...
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### AmericanOptionImpliedVolatility strange answers for calls IV's

My data provider includes the greeks. I tried to compute the IV's myself using RQuantLib and see if they match -- for Puts it's generally close, for Calls however certain values are way way off -- any ...
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### Option Chain Implied Volatility Calculation

I have the following EOD options data for the SPY containing IV data for each strike. ...
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### AmericanOptionImpliedVolatility - root not bracketed issue in QuantLib/R

I'm trying to compute an implied volatility -- I am trying to match real data I see in Yahoo finance which shows an IV of about 27%. My call in 'R' for the same params returns a root not bracketed ...
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### Why don't real-world probabilities affect the price of a call in a 1-step binomial model?

I was a bit hesitant to post this question because it seems so basic...but I wasn't able to figure it out on my own. Say we setup a one-step binomial tree with $S_0=100$, $S_u=110$ and $S_d=90$, ...
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### Notional Value in Equity Options

I have calculated the NPV of an Equity option and need to account the notional for it and have issues understanding the NPV <-> notional relation. Example: Strike price 100 Spot rate: 107.41 NPV ...
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### Analysis of exercising a call option early

Most options traders sell their call options early instead of exercising them, as you would make a bigger profit this way due to being able to salvage some remaining extrinsic value. For example: ...
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### Determining Strike Price given stock price and option price

I am having a bit of trouble with this problem: Say the current price of a stock is 100 and an individual purchases an in the money option for 10. Using that info, how can you determine what the ...
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### how to do interpolation in the term structure of volatility surface?

everyone~ I am a newbee in the quantitative finance and I meet a problem in working out an equity option volatility surface. We use the reasonable market data to derive the implied volatility, then ...
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### Implied Volatility in Heston Model

recently I started reading the interesting book about option pricing in the stochastic volatility world from Lewis. He gives very interesting and detailed insights about this topic in general. However ...
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### Why do banks offer options? [closed]

I have only taken one introduction class in finance. However we came along opinions, their pricing, etc. We only contemplated being the buyer of a option. If everything works for you apparently you ...
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### $E[F_T] = F_0 \ \rightarrow \ \text{or} \ \leftarrow \ p = \frac{1-d}{u-d}$?

From Ch 12 in Hull's OFOD, we compute the risk-neutral probabilities for a futures contract: Later in Ch 17, futures options are valued, and we have the same result: In relation to ...
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### Pricing when arbitrage is possible through Negative Probabilities or something else

Assume that we have a general one-period market model consisting of d+1 assets and N states. Using a replicating portfolio $\phi$, determine $\Pi(0;X)$, the price of a European call option, with ...
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### Delta Hedging for 2 Factor Models

If the value of an option at Maturity is what is the off-setting position you take for X and Y, if you are i)Long Call of the option ii)Short Call of the option iii)Long Put of the option iv)Short ...
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### European Call Option Delta Upper Bound

For a pure equity process (with interest rate, dividend, etc., being zero) not necessarily the geometric Brownian motion, is the delta of a European call option always no higher than $1$? I am NOT ...
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### hedging of a spread option with call

We have 2 underlying $S^{1}$ and $S^{2}$ with BS dynamic under the risk-neutral measure (r constant...) I found the (big) PDE satisfied by the price function $u(t,x,y)$ of a call spread whose payoff ...
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### Under what circumstances Veta is positive?

In general, as the option moves towards expiry, its vega is decreasing. Are there circumstances where the veta, i.e. the sensitivity of vega with respect to time, is positive, that is when vega is ...
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### Greeks for binary option?

How to derive an analytic formula of greeks for binary option? We know a vanilla option can be constructed by an asset-or-nothing call and a cash-or-nothing call, does that help us? Wikipedia states ...
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### pricing with implied volatility surface

I am a newbee in Quantive finance. supposing I calibrate a smoothing implied volatility surface with cubic spline now. A minute later I want to price K=100,t=1 option, can I just find the point on ...
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### delta hedging strategy for OTM option

Wondering how you would think about the following thought experiment - suppose you sell an OTM call option and plan to implement a delta hedging strategy whereby if the price of the stock were to ...
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### Basic Metrics for Option Trading Limits

Imagine a trading house that trades options in a modest way, and is looking for simple but effective metrics over which trading option limits will be set. Some random thoughts: 1) VaR is not ideal, ...