Reputation
934
Next privilege 1,000 Rep.
Edit questions and answers
Badges
7 13
Newest
 Revival
Impact
~33k people reached

  • 0 posts edited
  • 0 helpful flags
  • 16 votes cast
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.
Jul
21
comment How to interpret Realized Volatility and TSRV using R
Yes, Colin, my bad, I was thinking about BPV, and what I wrote was incorrect. I upvoted your answer.
Jul
21
comment Can VIX be interpreted as a proxy for instantaneous volatility?
What do you mean by "end-of-month VIX" Once a month? Then they will have 20x less observation points, and estimate will not be nearly as efficient.
Jul
16
comment How to interpret Realized Volatility and TSRV using R
Surprised your TSRV > RV. Can you check your calculations on longer time intervals?
Apr
2
comment “Extract” the density of the underlying, given the implied volatility “surface”
Seems like there are two issues: 1 interpolation and extrapolation, and 2 - K1 & K2. First - you'll get better (more robust) theo vols if you use model-based interpolation (SABR, SVI, etc) to create no-arb density. Using just "any" interpolation method (e.g. splines) could have arb, and your wings, density will be messed up. Second - seems like you have some computational limitation, that you cannot evaluate the function on a sufficiently large interval. Can you elaborate?
Mar
6
comment Why theta multipled by days to expiry exceeds the total time premium of the option
@Victor123 You are probably looking at option price chart, not at theta chart. Theta approaches zero as you get closer to expiration.
Mar
4
comment Does an implied volatility always exist for a binary option?
Mike, I think @brian-b and pc-iit would both agree that while numerical solution for a valid (0<BC<{e}^{-r\tau}) price can always be calculated, sometimes option ask is quoted above the upper value. The real answer to your question is that sometimes you cannot calculate IV. This is true for vanilla options as well (e.g. itm bid below intrinsic value)
Nov
7
comment American Option price formula assuming a logLaplace distribution?
Just few basic "sanity checks": What do you mean "calls being routinely double puts"? If you're looking at ITM calls, they certainly can be double the price of puts, or even more. Or are you comparing ATMF? Did you accidentally add "drift" into your model? Try with r=0.
Nov
5
comment How to properly take averages to reduce data in regression/panel data analysis
Can't help directly, but can comment: 1 if you have major differences between mean and median based results - your data has too much skew. You need to cover your basics - are there outliers, is there a skew in population or in your grouping? Can you transform your data (e.g. power transform, or some ratio) to make it more normal? If 2 My Matlab usually can handle this size of data. Are you using 32 or 64 bit matlab? What kind of regression model do you use?
Oct
25
comment evaluation of volatility models using loss functions
I assume if you have test your model with M-Z, and find it to be highly biased, you would do something about it in practice ... I think R^2 is more informative than you suggest.
May
29
comment Which greeks do you need to hedge if you want to implement an implied-volatility security?
Excellent points Freddy!
May
27
comment Probability distribution of maximum value of binary option?
Clarify the question: do you mean - if we consider price series of a binary option, what is the PDF of maximum of the price of such option?
May
26
comment What are VIX back-month futures based on?
I'm sure it's somewhere on the CBOE or CFE website. Here's one quote: "The settlement date for VIX futures is the Wednesday that is thirty days prior to the third Friday of the calendar month immediately following the month in which the contract expires ("Final Settlement Date")." The contracts are the ones used the settlement price calculation.
May
23
comment What is the market standard for pricing VIX futures?
@glyphard Respectfully disagree. Theoretically, and practically VIX futures cannot be replicated - VIX index is calculated as a square root of a basket of options. Square root is a non-linear transformation, making arbitrage impossible. Hedging off SPX options is quite risky - this is not your regular basis risk - the basis in SPX/VIX is nonlinear with its own set greeks, and VIX traders that I know do not use SPX for hedging, but rather trade in the entire VIX futures and options product suite, since in the VIX options are the dominant market with much greater volume.