9,354 reputation
1530
bio website
location Hong Kong
age
visits member for 2 years, 9 months
seen 4 hours ago

May
13
comment Calculate correlation between two sub portfolios and the combined portfolio
Marco Breitig's solution may be accurate, that by default does not make mine incorrect. You downvoted so I would appreciate if you could explain your rational why my solution is incorrect. Portfolios a, b, a+b, all draw from the same covariance matrix and same assets. Hence creating a portfolio with weights in assets equal to a portfolio a+ b should lead to the the correct covariance between this and portfolio a or b, using my proposed solution.
May
13
comment Are Futures exactly Delta One?
For the sake of clarity, some confusion arose because of the difference between forward price and forward value. @Swap.Jat, can you please specify what exactly you try to determine?
May
13
comment Calculate correlation between two sub portfolios and the combined portfolio
I saw that edit but that link (though I was the one who initially provided it) leads one down an incorrect road because the question there is about portfolio correlations with their own assets. Using my approach you should get the correct covariance and from that correlation between two portfolios if you construct the weight vectors carefully. If you downvoted it can you explain why this approach would not work (in detail if possible as I like to learn what I got wrong).
May
13
comment Calculate correlation between two sub portfolios and the combined portfolio
Sure, and combined portfolio weight vectors can simply be set up by combining portfolio a and b weightings. Hence, you can easily derive the covariance between portfolio a and (a+b). I am a bit rusty on linear algebra so I am only 90% confident this is right, please correct and explain why if not.
May
13
comment Are Futures exactly Delta One?
I edited my answer to make it more precise when practitioners refer to a forward delta as 1 and when they define it to be exp(r(T-t)). Generally though forward delta of 1 is considered because most traders concern themselves with changes in valuations and with setting up precise hedges and not how forward prices change in the future (the difference between price and value of a forward contract is important).
May
13
comment Price of portfolio with target volatility
how do S1 and S2 correlate?
May
13
comment Calculating Bollinger Band Correctly
I am not into python but looks like that your average (ave) time series does not look right in relation to "SP", at least ave does not converge with "SP".
May
13
comment Are Futures exactly Delta One?
Please read carefully, I did not say that either.
May
13
comment Are Futures exactly Delta One?
I never agreed with your statement, in fact I did not even discuss the "discounted spot price". But let me be more specific that I was referring to the delta of a forward of a non-dividend paying stock. My answer stands, the delta of such contract is 1.
May
13
comment Looking for C# library that provides/contains performance analytics
...will write my own library. I am almost convinced that is the best way anyway because performing most performance algorithms during time-series building run-time is computationally way more efficient than doing so on top of completed time series. I think your rude and condescending attitude to those who wrote up the two answers is out of place, especially given that you could not even write up your own two lines of answer, either because you have a beef with me or for whatever other reason. I do use R, but not for this project, hope this makes it clear now.
May
13
comment Looking for C# library that provides/contains performance analytics
Dirk, I think you should contain yourself a little, you are getting offensive. Given that a number of investment banks nowadays run whole exotic option pricing engines on Windows Servers, that most tier 1 bank pricing library's language of choice is C# nowadays, that many of the new front-ends are served via WPF guis does not lend much credibility to your arguments. You are the only one who sounds furious that I am not embracing R, and I have no idea why you would care. I told you already I wont use R and if I do not find a better solution then I ...
May
13
comment How to price long dated options most efficiently?
You are welcome, and the difference in final price are negligible, given you compare apples with apples, model-wise. Unless I know exactly what alternative pricing approach we are talking about I would not know which one is computationally more intensive.
May
13
comment Are Futures exactly Delta One?
I disagree. Can you please walk me through your derivation of forward delta? You need to discount the change in value back hence exp(r(T-t)) cancels out.
May
13
comment Calculate correlation between two sub portfolios and the combined portfolio
downvoter, care to comment? Anything wrong with my logic?
May
13
comment How to price long dated options most efficiently?
You should read up on the underlying methodologies. If you make the time spans between discretizations small enough the solution converges to exactly the same as if you used a closed form solution (given same underlying model). There is a reason monte carlo approaches are perused at most every exotic rates and equity desk. By the way a lot of banks locate the pricing of long-dated option contracts with the exotic guys because those are the ones that are better at stripping out dividend curves, and anything else that affects long-date contract pricing.
May
13
comment How to price long dated options most efficiently?
I do not find your criticism towards Monte Carlo simulations valid - if you use the same underlying model, for example a specific discretization, you get the exact same value (option price or greek or what have you), regardless of whether you derived the value through BS or MC. The difference originates from the underlying pricing model or model that you use to drive the asset price evolution.
May
12
comment In a mis-matched trade who profits?
"almost surely" is trademarked by Steven Shreve (CMU) already ;-)
May
12
comment Why is “full” Yield Curve (term structure of interest rates) 3 component based?
Not necessarily. There are a myriad of reasons why certain instruments are used and that can change over time. Example, the libor "rigging" scandal fundamentally changed how libor curves are built at many desks. I am not a curve building expert by any means, just saying chosen instruments do not always depend on liquidity alone.
May
12
comment Why is “full” Yield Curve (term structure of interest rates) 3 component based?
Well, tread carefully, I have only peeked at QLNET and saw the bootstrapping and curve building functions, I have not used them. Maybe more experienced users will add more insight.
May
12
comment How to price long dated options most efficiently?
I said European. I do not have much experience pricing long-dated American options. Maybe someone else can chime in.