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  • 26 votes cast
Apr
17
comment What are flickering orders?
Less work - you ignore self-generated noise
Apr
16
comment What are flickering orders?
@KylinYi flickering bid below the best bid, or flickering offer above the best offer would not affect the top of book - which is the best bid and best offer. However flickering forces the exchange to process these "extra messages" and send out those quotes to other firms, who in turn have to process those as well. So it creates extra work for competition.
Apr
16
comment How to hedge a barrier option with vanilla options?
@RandomGuy - you have good instinct for solving the problem - you use vanillas (possible different strikes / expirations) to get as close to your hedge as you can, and then you're left with some residual path dependent risk that you're left with.
Apr
5
comment Pricing of Black-Scholes with dividend
Hint: read the question again; it is asking about price and greeks at t=0, not t=1.
Apr
3
comment Sensitivity of short-term vs long term options' IV
Don't have the book in front of me, and I believe the statement was made about ATM. But IMO it also makes sense (as far as rules of thumb go) for any fixed log-moneyness.
Mar
18
comment Shorting an option every day vs shorting only at maturity
Can you please explain what you meant by "expected returns to Strategy A will have fatter tails while returns to Strategy B will have higher kurtosis" ? Usually fat tails is synonymous with high kurtosis.
Mar
16
comment How to appropriately measure volatility in assets with different execution dates?
Maybe you could explain your question better. If "asset 1 is expected to expire in one day and asset two is expected to expire in two days" then there is no need to worry about 2 day hedging. You just need to hedge it for one day, and then figure out some other hedge, with some third asset, or exit the position.
Mar
15
comment Why are there two expressions for the Black-Scholes hedging portfolio
The second formula looks suspicious to me. Can you check?
Feb
24
comment Problem with overlapping data when testing futures market efficiency
It is hard to suggest a general technique, but in linear regression you should use Newey-West correction.
Feb
23
comment Difference in implied volatility calculation
I understand the confusion as both have "implied volatility" in it, but the question was about strike specific implied volatility, i.e. B-S IV. If you look at the vollib link provided in the question, you will also see explicit reference to B-S. And in the option chain quotes yahoo finance also calculates strike specific IV.
Feb
22
comment Difference in implied volatility calculation
What is that ln(1+D/S) ? Shouldn't it be D/S-1 or ln(D/S) ?
Feb
22
comment Difference in implied volatility calculation
Implied volatility has a specific meaning, which is volatility such that plugged into B-S formula produces market price. Your "answer" did not answer the question that was asked.
Feb
18
comment How to price jumps in payoffs
The question is about jumps in derivative payoff, path-dependent dis-continuities. The papers you sited are about jumps in the underlying process, a different topic.
Dec
29
comment Implied volatility: sensitivity to the underlying spot price
We seem to be talking in circles - so you determined implied spot from options, what is the problem? What are these put-call discrepancies? You should have implied spot and implied rate for each time slice, they can be different from one expiration to another, it is not a "discrepancy" if there is a reason for differences like dividends for equities, or if you're working with non-storeable commodities.
Dec
23
comment Implied volatility: sensitivity to the underlying spot price
If your spot data is suspect, there is not much you can do - and still this has nothing to do with the d IV / d Spot that you were asking about. If you have a robust options market you can calculate implied spot (and implied rate) and use that.
Dec
17
comment Implied volatility: sensitivity to the underlying spot price
If your task is to calculate implied volatility, why would you need the sensitivity? Just calculate IV.
Dec
11
comment Implied volatility: sensitivity to the underlying spot price
There is no single formula, there are some models (SABR yes, Black-Scholes no) that have IV - spot dependency. Or you can derive some purely statistical model. What is the practical context of your question?
Dec
7
comment pricing with implied volatility surface
@Tim, "to price" here is a bit misleading. If there is a market, there is a price. Fair value may be a better term, but really all this is for the purpose of hedging - delta, and gamma through inventory management.
Dec
5
comment pricing with implied volatility surface
@Tim Yes @ Gordon, yes, or just use delta directly. The choice of "basis" is unlikely to have any major difference for one-minute interval.
Jul
29
comment why many option contract price less than minimum boundary price?
Check two things: 1 Are you using correct risk free rate? Should be something like 7 or 8%. 2 f&o Bhav file does not provide you with bid and ask prices, only settlement prices. It is possible that settlement price for some options is below arb because bid ask is wide, and average (or settlement from last price - stale) is meaningless. Finally I suggest you add one example to your question - all the numbers, rates and prices.