Andrew
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 Mar 13 comment main arbitrage & statistical arbitrage concepts I'll answer some questions if you tell me what your profile picture is a volatility smile of, why you are going flat vol, and why are you linearly interpolating :) Jan 23 answered Are there any derivatives which pay amount $a(p-b)^{2}-c$ where $p$ is the price of underling asset? Jan 23 answered Typical coefficients uses in square-root model for market impact Jan 22 comment What are the advantages/disadvantages of these approaches to deal with volatility surface? We can compute the price of vix options using spanning formula from Peter Carr using Ito's Lemma (I will elaborate on this a later further later as it is trading hours). There are arbitrage free parameterization of the vol surface under all conditions that Jim Gatheral derived in SVI right here papers.ssrn.com/sol3/Delivery.cfm/…. Jan 14 answered What are the advantages/disadvantages of these approaches to deal with volatility surface? Jan 13 answered Why is short term implied volatility typically higher? Jan 4 comment BS and delta hedging questions interesting. did not know that even under stochastic vol bachelier and bs are that close Jan 2 comment BS and delta hedging questions @Freddy, assume interest rates 0, dividend 0, then $value = SN(D1) - KN(D2)$ in geometric brownian motion. and S=K $value \approx S(N(0) + N'(0) * d1) - K(N(0) + N'(0) * d2)$ by 1st order taylor expansion $value \approx S(1/2 + \frac{\sigma\sqrt{T}}{2\sqrt{2\pi}})- K(1/2 - \frac{\sigma\sqrt{T}}{2\sqrt{2\pi}})$, since S=K $value \approx \frac{S\sigma\sqrt{T}}{\sqrt{2\pi}}$, since $1/\sqrt{2\pi} \approx 0.4$, $value \approx .4*S\sigma\sqrt{T}$. again, still gbm Jan 2 comment BS and delta hedging questions @Freddy, I am saying that for the .4*S*$\sigma * \sqrt{T}$, this derivation comes from B-S value of a call/put. if you assume 0 interest rates, you can taylor expand it and you will see this result and as you noted, B-S follows geometric brownian motion. so it should be the asset price follows geometric brownian motion Dec 31 comment BS and delta hedging questions actually, asset prices do not follow arithmetic brownian motion in .4 *S*$\sigma * \sqrt{T}$, it is still geometric brownian motion. just do a simple taylor expansion on B-S formula and you will see Dec 27 answered What is the instantaneous P&L of a Variance Swap? Dec 23 comment Trading a synthetic replication of the VVIX (volatility of VIX) vix is mean reverting but vol of vol does not seem to be mean reverting. std is well known to decay at ~$\frac{1}{\sqrt{t}}$ Dec 23 answered Trading a synthetic replication of the VVIX (volatility of VIX) Dec 23 awarded Supporter Dec 23 comment easy one step option replication please read the new answer below Dec 23 answered Trading a synthetic replication of the VIX index Dec 23 answered easy one step option replication Dec 23 comment easy one step option replication The reason this is because, we can hedge out uncertainty by using the stock. Dec 22 answered easy one step option replication Dec 17 comment Kalman Filter Equity Example a Kalman Filter is built into the Kyle-model. Implementing the settings for the kyle model will give you a great example of how some market makers actually trade as well as some intuition of real financial markets using kalman filter