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Apr
14
comment Why Drifts are not in the Black Scholes Formula
@Quantuple : Yes, but we should assume everything else being equal. So imagine two markets with the same volatility, one non-drifting and just randomly entering price F, and second one drifting and just passing the same price F at this moment. Question is, why these two situations yield the same option prices even though it seems that either calls or puts have higher probability of ending up in the money for drifting market. I tried to rephrase it again in previous comment.
Apr
14
comment Why Drifts are not in the Black Scholes Formula
@HenryHenrinson : I believe I am answering just that. Rephrased - I assume, that any type of dependence on drift should move call and put prices in opposite directions (one option being more probable to be in the money than other). But that violates CP parity, because for constant price of underlying, all changes to call and put prices have to happen in same direction.
Dec
8
answered How to change to risk neutral measure in a mean reversion process?
Oct
1
answered put call parity for futures options derivation in Hull
Apr
16
awarded  Yearling
Apr
16
answered Method for finding a arbitrage opportunity when market price of call is incorrect
Apr
7
comment Call vs. Put Option
Regarding the put/call parity for the ATM and r=0 case, here is why is it intuitive: In the first case you have an option to buy the Thing in the future at its current price S (call). In the second price you are promised to receive the Thing at its current price S (forward) and you have an option to refuse it (sell it back at the same price S) (put). These two situations are clearly the same, regardless of what the Thing is, what are its price dynamics and whatever else.
Mar
20
awarded  Critic
Feb
11
awarded  Nice Answer
Feb
9
comment Simulating Stock's close, high and low prices
He is proposing just to generate stock prices with more nodes (multiple nodes per day), and just calculate the open, high and low from them. There is an additional decision you will have to make - how many nodes (or how big volatility) will you simulate during the night (between close and open) so that they differ.
Jan
5
awarded  Commentator
Jan
5
comment Can a null be inconclusive?
Oh, I probably did not understand you correctly and I am not sure now, but: it cannot happen that the two do not agree. P-value is satisfied (low enough) only when the test statistic is outside the critical levels. If it does not happen for you, check your calculations.
Jan
5
revised Can a null be inconclusive?
added 4 characters in body
Jan
5
answered Can a null be inconclusive?
Nov
27
awarded  Editor
Nov
27
revised Does it make sense to use upward and downward volatility in option pricing?
Factual correction
Nov
26
answered Does it make sense to use upward and downward volatility in option pricing?
Oct
13
awarded  Popular Question
Sep
4
awarded  Yearling
Sep
1
answered What kind of front end/ gui is used with trading applications?