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Apr
1
comment Implied Volatility Calculation
This question has been asked before: quant.stackexchange.com/questions/7761/…. Use Newton Raphson to solve for the implied volatility.
Apr
1
comment Value a structured note with Black-Scholes
@PLui, I edited my answer and added point "B". This should be plenty enough to get you to the answer.
Apr
1
revised Value a structured note with Black-Scholes
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Mar
31
comment Value a structured note with Black-Scholes
Plui, to answer your question knowledge of what drives the price of the index is essential. Unless of course this is a homework or take home exam and the lecturer asked you to assume that the payoff can be modeled via BS.
Mar
31
comment Value a structured note with Black-Scholes
@MarkJoshi, I guess I am confused then how 1000 + 2.5*(Index(T)-1100) can be the same as 2.5(Index(T)-1100). From PLui's confirmation the payout when S(T)>1100 seems to be the former payoff. Secondly I disagree with you that this can generally be valued using BS. How would you assert this is possible if you do not even know what the Index is about and whether the Index price evolution can be modeled with an identical stochastic process than what BS implies? For what its worth the index could be an interest rate.
Mar
31
comment Value a structured note with Black-Scholes
@MarkJoshi, when you say "you'll get something close to 1000", do you mean the price of the note should be close to 1000? I do not follow the rational if that is the case because unless you know the "risk free rate", dividends (or other yields, after all it is an index not a stock) as well as the volatility it would be hard to tell, imho. Also, should the payoff (if ST > 1100) not be 1000 + 2.5*(ST-1100)?
Mar
31
revised Value a structured note with Black-Scholes
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Mar
31
revised Value a structured note with Black-Scholes
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Mar
31
comment Value a structured note with Black-Scholes
Can you please first confirm that the payoff function is correct?
Mar
30
answered Implied Vol vs. Calibrated Vol
Mar
30
answered Value a structured note with Black-Scholes
Mar
27
answered What is the difference between a benchmark yield curve, funding curve and a basis spread curve?
Mar
27
comment The use of GARCH
@lehalle, sure that would be nice to have, maybe you could write up an answer that includes all that? I am sure the community will attach a fair value to your answer and also assess a relative fair value to this answer as well.
Mar
26
comment Impact of Implied skew variations on future prices
As the paper correctly pointed out, conventional skew measures are often influenced by the volatility level and kurtosis. You can start with a simple OLS and also try what a weighted least-squares approach. You may also want to look at lead-lag effects.
Mar
25
awarded  Custodian
Mar
25
reviewed No Action Needed Financial Mathematics essay topic
Mar
25
reviewed No Action Needed Java Implied Volatility Solving with Newtons Method
Mar
25
revised How to account for correlation between strategies when they are added linearly?
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Mar
25
comment How to account for correlation between strategies when they are added linearly?
well then make adjustments as I suggested in the first part of my answer; adjust weights up and downward based on pairwise correlations between strategy returns, though I would also take into account the correlation between return variations. I will edit my answer to provide more specific recommendations.
Mar
25
comment How to account for correlation between strategies when they are added linearly?
I do not fully understand your comment. M-V optimization does exactly that. It takes the return volatility of each asset into account and optimizes the weights as function of return volatility.