Freddy

5,629 reputation

1316

bio	website
	location	Tokyo, Japan
	age
visits	member for	1 year, 2 months
	seen	2 hours ago
stats	profile views	587

	5,629 reputation	bio	website		visits	member for	1 year, 2 months
1316 badges		location	Tokyo, Japan		seen	2 hours ago

summary answers questions tags badges favorites bounties reputation activity

463 Comments

suggestions reviews revisions comments badges posts accepts all

Apr 16	comment	How do you know if if an option is priced correctly? @AprilCrenshaw, you do not need to mark an answer correct right away, take your time, wait for other answers to come in...just my 2c
Apr 16	comment	SDE(s) satisfied by Radon-Nikodym derivatives of certain martingale measures sounds awfully like homework.
Apr 15	comment	Call option arbitrage opportunity the arbitrage profit is correct. So what is really your question? When I said "not exactly" I was referring to your terminology "buy back the stock for 18" you used. Maybe I was a bit too picky, but yes the net effect is just that.
Apr 15	comment	Call option arbitrage opportunity Not exactly: You buy back the stock at whatever price it is traded at, you exercise the call if the stock price is above your strike at expiry and you get back your investment of 17 plus interest.
Apr 15	comment	Greeks of Basket what is your payoff function?
Apr 15	comment	Call option arbitrage opportunity The simplest way to show arbitrage opportunities here is the lower bound of the call price which is call > value of underlying asset - PV of strike which should force the call option price to be above about 3.71. Anything below that presents an arbitrage opportunity. Obviously the OP has made clear that he made a lot of simplifying assumptions. Thus, we are talking about a theoretical arbitrage opportunity absent of any transaction costs, liquidity issues, dividends,...
Apr 10	comment	Hedging duality are you by any chance affiliated with CMU? ;-) Notation looks somewhat familiar. Just wondering.
Apr 7	comment	OTC Equity Options' Dynamics @JoeCoderGuy, not much to say here. There are platforms depending on asset class such as Barx fx OTC options but most often such platforms are just presentation platforms and are at best connected to a trading system or oms. Other times quotes are just send over Bloomberg chat or Bloomberg messages. On the retail side SaxoBank is one of the very few if not only institution that shows publicly accessible OTC fx option quotes.
Apr 7	comment	Software for backtesting outside strategies (CSV transaction upload) @dordal, yes your assumptions still are unrealistic. Most always the assumption of being able to trade at the closing price is purely theoretical. Also how do you plan to manage risk? You are fine having a position go against you by 20%? If risk is already inherent in your buy and sell orders then I do not understand why you don't just follow my and hroptatyr's advice. Coding up something that matches up prices and calculates risk and return should be simple and a matter of less than an hour.
Apr 7	comment	Software for backtesting outside strategies (CSV transaction upload) Most likely there is not. But why would you want to do that? Your csv pattern above does not specify at all how you want the trades to be executed for performance attribution purposes. Do you want to get filled at the last traded price of the day, at the bid or offer or mid? You better write your own little code in R or even in Excel. Simply load the daily for the stocks in question, and iterate over your trades by pulling out the prices you want to simulate fills against. Done. Even with this you make tons of horrible assumptions that reflect anything but reality.
Apr 6	comment	Regression with Lagged variables it really depends on what your assumptions are of independence between the lagged data.
Apr 4	comment	Testing Black Scholes Analytical Options Pricer There are c# libraries out there as well. But point taken regarding the learning incentive though the formula is the same across the board. Tpl dataflow will not add much value in regards to that. I am saying that as someone who heavily peruses tpl dataflow in .net 4.5
Apr 4	comment	Testing Black Scholes Analytical Options Pricer @bytefire, why would you want to post your code on github? There must be more than 100 different BS pricing libraries out there, written in any conceivable language. Why not just picking one of those and using it?
Apr 4	comment	Testing Black Scholes Analytical Options Pricer ok, so then what is problem that you are having? Price the AAPL June 21, 430 Call, it currently trades at 23.10/23.40 with spot at 428.55. I see an implied vol of 31.38%, not sure they pay dividends before this call expires, I do not actively trade AAPL options.
Apr 4	comment	Testing Black Scholes Analytical Options Pricer which "method" to test? And which "method" are you using? and as edouard mentioned it would greatly help understanding which precise formulae you used before commenting on whether they are right or not.
Apr 4	comment	Testing Black Scholes Analytical Options Pricer you need to provide more information. If you cannot then simply price an option during market open and compare against the bid offer prices of liquid options trading.
Mar 29	comment	Portfolio risk-return when assets have limited and inconsistent historical data / time series? @phi, I see your point though please consider REITs are much more highly correlated with each other than cash equity over a 5 year horizon. I assume Sid is talking about equity portfolios here but in any case replacement by correlated asset generally only works if correlations are extremely stable which they are not for most all cash equity (I commented on that in my post). Have you looked at correlation stability in REITs? I would be curious if you care to share your findings
Mar 29	comment	Portfolio risk-return when assets have limited and inconsistent historical data / time series? @Sid, sounds less extreme to me than constructing an arbitrary time series that in no way reflects the true risk/return profile of the asset in question. I edited my answer to comment on correlated assets as well
Mar 23	comment	Black-Scholes and Fundamentals Agree with that notion.
Mar 23	comment	Black-Scholes and Fundamentals Generally from a purely empirical standpoint over many different market cycles, there is an inverse relationship in the demand for fixed income instruments and equities. Demand and supply for different asset classes is one thing, the purely technical relationship between yields and bond prices an entirely different.