All Questions

134 views

Which volatility to use?

For calculating the greeks http://www.vollib.org/html/apidoc/vollib.black.greeks.html Should I use historical volatility or implied volatility?
54 views

European Markovian option

Background information: Consider a European contingent claim with payoff $V(S_T)$, where $V: \mathbb{R}_+\rightarrow \mathbb{R}$ is a function which assigns a value to the payoff based on the price of ...
81 views

65 views

What is the formula that determines when VIX futures expire?

Or a source that will allow me to just get the list of dates into a program, I'm trying to do this in python but I want it to be able to figure out the next expiration automatically, or something like ...
158 views

Portfolio with lots of subportfolios

An account manager has $N$ distinct, equally-sized pots of money, which will be used to make $N$ distinct subportfolios, each of which is drawn from a slightly different (but potentially overlapping) ...
131 views

What is drift in interest rate term structure model

I was studying about the interest rate term structures and i came across term structure model with (and without) drift. I am really unsure about what this drift is in this equation for term structure ...
116 views

How to implement dummy variables into GARCH(1,1) model from structural breaks (ICSS)

Hello everybody, I was already searching a lot of forums and read a huge amount of different papers. But I guess I am to stupid or I am at a loss. Hopefully some of you are able to help me out. Here ...
52 views

What is the formula for variance in estimating exchange rate?

I was watching this Youtube Video. He used a exchange rates of Euro to Dollar for a few days and apply GARCH(1,1) to get the predicted price. However, I didnt understand variance that he calculates ...
77 views

Clarification of The Market Portfolio

I am currently reading John C. Hulls' "Risk Management and Financial Institutions" and came across the following passage related to the efficient frontier and combinations of risky and risk-free ...
88 views

What is smart beta, alternative index, factor investing?

What is smart beta, alternative index, factor investing? Are they basically the same thing? Construct a benchmark index using schema other than market cap?
64 views

Extracting IB market data: bid and ask for greeks and IV

I wrote a piece of code to get option chains with volatility and greeks from IB market data. After testing yesteday, it seems to work, but I am surprised of seeing bid and ask for impliedVolatility ...
100 views

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: ...
268 views

Dollar-Neutral Strategy

Here is an excerpt from E. Chan's book Quantitative Trading, However, if the strategy is a long-short dollar-neutral strategy (i.e., the portfolio holds long and short positions with equal ...
7 views

Is Market OPG an efficient means of entering positions at historic daily open prices?

This question pertains to backtesting a strategy against historic daily data. If a strategy is devised using such data, is Market OPG a reasonable way to enter positions? Expanding, the question is ...
65 views

Modelling prepaid commodity swaps

I'm somewhat new to derivatives, so please forgive a potentially silly q: Suppose there is a VPP agreement (volumetric production payment) which is basically a prepaid commodity swap. The financier ...
177 views

Why can CDS indices be used as a bond market index?

I don't understand why the iTraxx indices family, which are credit default swap indices, are in practice often used to gauge the bond market. How are CDS prices related to bonds prices? And what other ...
103 views

How to determine volatility for private company for Black-Scholes

I am trying to determine the volatility to use Black-Scholes to value some warrants for a private company. Very few comps are public or they are large diversified businesses. Any thoughts on how to ...
180 views

Ito Formula for Stochastic Integral

Suppose I have $$dS_t = \mu(S_t,t) dt + \sigma(S_t,t)dW_t$$ What would be the process satisfying the following process of $y_t$? $$y_t = \int_0^t S_u du + \int_0^t S_u dW_u$$ I'm not quite sure ...