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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1answer
115 views

Symmetry of option-implied probability density

I was wondering whether the option implied probability density of the log returns: $x = \ln\left(\frac{S}{S_0}\right)$ with S the value of a certain stock, is always symmetric ? I was asking myself ...
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2answers
169 views

monthly contract volume required for penny increments?

Have the exchanges disclosed their criteria? Does anyone have a best guess based upon observations of volume (however you wish to define it)? Please no qualitative answers.
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0answers
21 views

Intermediate Project Presentation

I would like to know an ideal plan for explaining/representing Greeks (1st,2nd,3rd) order. The topic seems to be quite vast and very interesting but not possible to cover within a 15 mins time frame, ...
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0answers
39 views

Benchmarking option pricing under stochastic interest rates

I priced a long-term option (10 or 20 years) using two different models: one assumes constant interest rates, the other assumes stochastic interest rates. Is there a way (e.g. a benchmark) to ...
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0answers
40 views

“Hedging” a put option, question on exercise

I have a question on the following exercise from S. Shreve: Stochastic Calculus for Finance, I: Exercise 4.2. In Example 4.2.1, we computed the time-zero value of the American put with strike ...
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1answer
45 views

Transaction costs on option trades

It looks like the commissions alone for a non-index option trade is around 2-5%. For example, a BAC June ATM Call is currently trading at \$0.20; Interactive Brokers charges $0.7 per contract, which ...
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0answers
57 views

Cointegration and variance of time series

Given that $X_t , Y_t$ are two cointegrated random processes, what can we say about the relationship between variance of the two increments $var(X_{t+h}-X_t)$ , $var(Y_{t+h}-Y_t)$ for a given ...
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0answers
52 views

variance ratio for pair-trading

I am using the variance ratio test to check whether my sequence is mean reverting in that test there is a parameter n, How in general I choose this n? or what is the meaning of this parameter? ...
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0answers
45 views

Binomial function use in Bezier smoothing

I am using the Bezier method to smooth option volatility curves, which utilised the binomial distribution. Is someone able to clearly explain the interpretation of the binomial distribution in the ...
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1answer
90 views

Binomial tree vs trinomial tree in pricing options

Very new to pricing models. Is there a general guideline when to use binomial tree and when trinomial tree is preferred? As far as I know, unlike binomial tree, trinomial tree only gives a range ...
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0answers
17 views

Principal Protected Notes

I have a few questions on the structuring of principal protected notes. Let's say that the note has a call option on the S&P500 so that it has the following payoff at maturity: $PPN_T=100\% + A ...
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0answers
6 views

Finding the price of an option that will be exercised [duplicate]

I am reposting this question because it was originally unclear, and I didn't get the answers I was hoping for. In my finance book I have the following question T-bills currently yield 5.5 percent. ...
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0answers
18 views

How discount TVaR of a put option?

Let say I want to calculate the TVaR of a put option. After I simulated possible outcomes in real-world, how do I discount the outcomes? Is there a difference if I am hedged or not? I tried to use ...
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0answers
21 views

Price a put option on a CPPI

I want to price a put option on a CPPI using Monte Carlo. I have found so far this article which prices a call on a CPPI. I was wondering if I could use the put/call parity here, and and if so, how ...
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0answers
23 views

Literature on “Risky Risky” Method

Trying to get some information/examples on a method called "risky risky" in the context of equity option/convertible bond valuation.
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0answers
36 views

Impact of Implied skew variations on future prices

I want to test the relationship between of the oil implied volatility skew and oil future prices. I'm lost regarding the method to test the relationship. I was thinking about a regression but I'm ...
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0answers
33 views

Complicated American style option contract with numerous non-standard features (simultanous exercise, additional premium, etc.)

I want to value the following contract for times $0<t<T$, i.e. determine $V(t,\cdot)$ where $\cdot$ refers to all other dependences (strike, spot, volatility, etc.). The contract is long and ...
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0answers
12 views

How does implied volatility of puts relate to strike price in presence of negative news? [duplicate]

There is a lot of literature available but i don't kind understand that if there is a negative news about a stock with the traders why do puts with lower strike tend to have higher implied volatility ...
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0answers
55 views

How to value an expansion option?

Fair warning this is help with homework. I am not asking for an answer but some guidance or a formula would be nice. I have absolutely no background in finance and this class is online with no ...
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0answers
43 views

How to generate jump times in in Multilevel path simulation for jump-diffusion SDEs?

I am trying to generate jump times in in Multilevel path simulation for jump-diffusion SDEs using the following MATLAB code: I used following Algorithm in Yuan Xia paper: But I have not reached ...
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0answers
84 views

Derivation of the formulas for the values of European asset-or-nothing and cash-or-nothing options

The asset-or-nothing European option pays at t = T the value of the stock when at time T that value exceeds or is equal to the exercise price E, and nothing if the value of the stock is below E. So, ...
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0answers
53 views

European style average price option Delta

I use a numerical method to calculate the value and Greeks of an European style average price option, e.g., with a given volatility, I simulate 1000 random walk price paths find the average value ...
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0answers
20 views

Residual maturity vol

The following question is probably (from a practical point of view) more relevant for EM markets which typically exhibit a more pronounced forward volatility compared to spot volatility. Say I buy a ...
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0answers
14 views

Option platforms providing eurex products

I search an option platform providing eurex products as eurostoxx 50. Can you advice me some platforms ? Thank you in advance for your answer Julien
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0answers
42 views

Value of a portfolio with a collar option and shares as function of a log return …?

I could use some help with a question I've been stuck with. It's stated as follows, A private investor owns a large quantity of shares of a single stock and is worried about the position being too ...
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votes
1answer
60 views

finding the strike / maturity of warrants given their ISINs

I have a list of French traded warrants identified by their ISINs. I do not know, however, to which stock they refer and what is their strike/maturity. Which datasets allow me to retrieve this ...
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1answer
121 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 ...
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0answers
46 views

Define some finance terminology for me, please. Live options vs. crossed options

What is a "live" option vs. a "crossed" option? Does a cross option just mean that it is hedged? If someone is buying an option and says "I want to buy a November 5.00 (strike price) put cross at ...
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0answers
49 views

Position Strength: Leveraged vs. Non-Levered

Is there some sort of metric or formula for bull/long strength in a market based on % of shorts/longs on margin, and perhaps even the size of that leverage? I ask because I participate in BTC (which ...
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0answers
72 views

Negative Risky vs Negative Butterfly

I understand that in regard to FX options, a volatility smile with negative Risk Reversals is effectively indicating that the spot market for a given currency pair is in decline (puts over). In ...
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votes
1answer
34 views

Common point between IR and Vol option pricing models?

What is the common point between pricing models on options on Interest Rates and options on Volatility?
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0answers
97 views

Option payoffs and replicating payoffs

I've come across the below question which has no answers to it and I was hoping someone could provide some help. I know it quite a long question and I appreciate any help with this. An investment ...
0
votes
1answer
205 views

Distinguish between market makers and other participants?

Are there any known quantitative techniques to distinguish between market makers and other participants? I manually MFT, have no knowledge of these specialties, and may be observing phenomena that ...
0
votes
1answer
362 views

Risk-free investment strategy for european call and put option

I have some trouble solving the following question: We have an european call and put option (with the same maturity date $T$ en strike $E=10$). The stock price now is $S=11$ and we use a continuous ...
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1answer
220 views

How to construct the binomial model for European option?

The annual interest rate is 5.3% and the annualized volatility of a non-dividend paying stock over the next six months will be 12.5% (annualized). i) Construct binomial trees of 5, 10 and 30 periods ...
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votes
1answer
122 views

Physical Option Implied Distribuition

So I got risk neutral probabilities from stock option prices. How can I then map them to a physical measure?
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0answers
131 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. ...
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0answers
241 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.
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0answers
27 views

explanation for preference of volatilities in option premium quotes [duplicate]

could any one suggest an explanation for why premium in option markets (currency or otherwise) are quoted as volatilities rather than (premium/abs(spot price - settlement price)) or some other ...
-1
votes
1answer
51 views

Is the price of a binary call not monotonous with vol for OTM

Is this true and how would you prove it
-1
votes
1answer
220 views

Option pricing within the Black Scholes model

Have a question regarding regular option pricing. In the standard Black-Scholes model, with interest r and volatility $\sigma$. Determine the arbitrage free price at t of an option which at $T>t$ ...
-1
votes
1answer
59 views

European Option Technical Exercise

I like to ask a practical question regarding the exercise of European Options: As we know, one may exercise a European option only at maturity $T$. But for example, if the option can be exercised ...
-1
votes
1answer
115 views

In a FX options book, is the sum of P&L equal to the portfolio value?

For a portfolio containing FX options, would the sum of P&L for each option be the portfolio value?
-2
votes
2answers
53 views

Option greeks: sensitivity to 1% move

In a Black&Scholes framework how can I compute the following sensitivities: to 1% move in the underlying price to 1% move in implied volatility I would like the greeks to tell me how many ...
-4
votes
1answer
100 views

Risk Neutrality Necessary for Dual Delta Calculation?

I have an option chain for a specific expiry date. Then calculate dP/dK numerically for each pair of strikes. My hunch is that this calculation is not risk neutral in the strictest sense of the word ...
-4
votes
1answer
888 views

Show that convexity of call price as a function of the strike is violated [closed]

European call options with strikes 90, 100 and 110 on the same underlying asset and with the same maturity are trading for 22.50, 18.84 and 13.97 respectively. show that the convexity of the call ...
-4
votes
1answer
46 views

Can not understand options pricing [closed]

As we are seeing here http://www.theoptionsguide.com/strike-price.aspx Relationship between Strike Price & Call Option Price Relationship between Strike Price & Put Option Price I do not ...
-7
votes
4answers
2k views

True or False? An option's price will always be greater than or equal to its intrinsic value

Since if the option's price is lower than its intrinsic value (eg. strike price - current stock price for puts), then an arbitrage opportunity arises from buying the option at bargain and then ...