379 reputation
13
bio website
location London, United Kingdom
age
visits member for 1 year, 9 months
seen Mar 23 at 10:27

I'm a quant / programmer and big fan of scripting languages - python in particular.

Based in London and working as consultant for the financial services industry after having worked many years in banks.

Trying to implement what I think are the right productivity tools for people in the financial community. Hoping to leverage existing tools and extend them: pandas / iPython / matplotlib.


Mar
21
comment Implied probability density (Question 2 - Applications and Interpretation)
you're welcome. The issue is that traders will usually only get vol marks for a few strikes, and you need to in/extrapolate. If your vols are constant, you will get the lognormal density, but if you start moving some of the vols arbitrarily, or if your in/extrapolation are not well chosen then you will quickly end up with negative density.
Mar
14
comment Implied probability density (Question 2 - Applications and Interpretation)
1) you can use a MonteCarlo, but then you need to sample using this density. In fact the density might not be practical because to sample a distribution it's easier to start from the inverse of the cumulative distribution fn instead. Besides, if you only have 1 dimension an integral is more efficient than MC 2) the density is closely related to the price of a butterly, i.e. call(K-delta)-2*Call(K)+call(K+delta) (just make delta->0). Now clearly the payoff of a butterfly is always positive, so because of that the density should also be positive otherwise there's an arb.
Mar
13
answered Implied probability density (Question 2 - Applications and Interpretation)
Jun
24
awarded  Yearling
Sep
16
awarded  Supporter
Sep
3
awarded  Critic
Aug
30
answered Indexes/stocks with flat implied volatilities
Aug
20
comment Is it more accurate to analyze returns on a calendar day basis than a trading day basis?
check out [quant.stackexchange.com/questions/3205/… of treating time in the BS formula), where I mention 'elastic time'. That's useful for option risk management, in that it takes into account the fact that some days are more or less volatile than others (week-end day being an important example).
Aug
6
answered market completion under stochastic volatility model
Jul
27
answered What is an acceptable error on implied volatility?
Jul
15
answered Why does Skew measure remain more-or-less constant for Listed Expiries?
Jul
11
comment Historical volatility from close prices (Haug pg 166)
For better efficiency, you could write log_squared_returns = [ pow(x,2) for x in log_returns ] and that would have prevented your error mentionned by @VincentZoonekynd
Jul
9
answered Is it true that pricing an IR swap doesn't require any stochastic model but calculation of the PFE of an IR swap would?
Jul
9
comment What really drives option implied volatility?
No indeed - change in demand does not imply actual transactions, but the role of the market maker is to have some idea of where the market is, and bid slightly lower / offer slightly higher so he makes money (at least if he's right about his assesment of the market and/or manages to offload his risk early enough)
Jul
7
answered What really drives option implied volatility?
Jul
3
answered Why use swap-rates in a yield curve?
Jul
1
answered Ways of treating time in the BS formula
Jul
1
answered Convexity of BS Equation for Call and Put
Jun
24
awarded  Teacher
Jun
24
answered Why do some people claim the delta of an ATM call option is 0.5?