Reputation
9,639
Next tag badge:
73/100 score
24/20 answers
Badges
1 6 31
Newest
 Custodian
Impact
~266k people reached

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?
added 135 characters in body
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.
Mar
25
revised How to account for correlation between strategies when they are added linearly?
added 131 characters in body
Mar
25
comment The use of GARCH
@lehalle, does it not directly address the question and answer it with which steps to take?
Mar
25
comment Proof oriented introductory text?
I think Shreve's 2 books are an excellent read but it would help to have some rudimentary background in measure theory. But I think all the books you recommended are pretty good. I would add to the list Rebonato's Volatility and Correlation which focuses mostly on interest rate derivatives. It is also fairly technical though less so than Shreve's books. +1
Mar
25
comment What is the fair price of this option?
I think the key point here is "perpetual".
Mar
25
answered How to account for correlation between strategies when they are added linearly?
Mar
25
comment Why the Black-Scholes formula can be used in the real world?
@vonjd, I have not voted on your answer but your comment " In a way if you priced derivatives with real world measures you would double count risk preferences because these are already included in the underlying" is factually incorrect. One should arrive at the same price of a derivative if one priced it via real-word probabilities and discount factors, given one knew them. Maybe that is why some users took issue with your answer. Just a hunch...
Mar
24
comment Rich Volatility, Poor Volatility
care to vote or comment on why any of the provided answers is not sufficient?
Mar
24
answered Why the Black-Scholes formula can be used in the real world?
Mar
17
comment Rich Volatility, Poor Volatility
all I know is that those are pretty much how prop vol traders price volatility. Of course one can sell vol because its high and buy because its low (or vice versa), but I find that a losing proposition. Volatility is a financial product like everything else, there are factors that impact volatility and some of those are the volatilities of impacting fundamental factors. Take oil for instance: If implied volatility of supply disruptions, vol of inventories, and vol of other fundamental factors are low then high implied vol levels of oil are most likely mispriced.
Mar
16
comment Rich Volatility, Poor Volatility
Interesting thoughts. Though is it fair to conclude from your comments that you do not find value in determining the explanatory "variables" into vol regime shifts? For example, volatility in delivery costs or times, volatility of oil supply, changes in political volatility in regions that impact oil prices generally, volatility in demand for oil end-products, volatility in weather conditions, and the like?
Mar
13
comment Where can I find literature (books, articles, etc.) about basic HFT / arbitrage strategies?
Let's not make this personal please. I read through your answer and I just did not feel it addresses the question and I provided a detailed explanation of my rational. Nothing personal.
Feb
28
awarded  Yearling
Feb
25
comment Why implied volatility is less for the back month option even though the back month option is more expensive
quant.stackexchange.com/questions/4936/…, and the fact that an option price is not only a function of implied volatility.
Feb
21
comment Under what circumstances would one want to delta hedge a straddle
A straddle at initiation does not have to be exactly delta neutral, not even an ATM or ATMF one. To make it delta neutral, it depends on the exact underlying we talk about and hence how you set the strike of the straddle. You can trade the gamma in the straddle and buy and sell the underlying during the life-time of the option.