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Feb
4
comment Vega in a “constant volatility” Black-Scholes world?
They are still useful as a measure of model risk. All models are wrong, some are useful.
Feb
2
comment Determining the implied volatility for options with bid/ask prices below the intrinsic value
If such a discrepancy really existed, one would want to buy lots of those options, short lots of futures of the expiry and wait for your risk-free profit. More likely, there's an error in your data somewhere though, either quotes from different times, using cash instead of forward prices, the wrong or missing implied dividends rates, etc.
Jan
20
comment Call options and portfolio of the same options worth less?
I mean the correlation between the assets.
Jan
18
comment Call options and portfolio of the same options worth less?
You might get some insight by doing the derivation for the case where the correlation = 1, then see what happens when you relax that.
Dec
4
comment Why Central Bank carry out Qe when they can directly force banks to lower down the interest rate?
I would just like to add that I am not sure this question is relevant for Q.SE.
Nov
3
comment how do we know if the volatility which is quoted in market is Normal (Bachelier model) or log normal (Black 76)?
You can also find quotes in shifted-lognormal these days, at least for swaptions.
Oct
30
comment Fitting High Frequency Indicators
It's a linear model, maybe throw it all into a kalman filter? Online updating, very fast.
Oct
27
comment Historical Volatility vs Implied Volatility Performance in Pricing Options
It depends what you are trying to do; if you are hedging an exotic option, price it with implied vols so you have accurate hedge trades. If you are trying to profit from vanilla mispricings, use historical vol. However, even in that case, it sometimes makes sense to use IV. See: math.ku.dk/~rolf/Wilmott_WhichFreeLunch.pdf
Oct
16
comment Why is it useless to model stochastic volatility when pricing Vanilla style derivatives?
Right, you calibrate your fancy model using vanilla options and perhaps digitals or barriers, and at the end of the day, if you did your job, you price vanilla options to the same as the market data. But, you could save yourself a lot of trouble by just using the prices of the market data, or some interpolation thereof. Fancy models are all about extrapolation from what you have calibrated to something for which you do not have ready prices.
Oct
15
comment Which algorithms do robo-advisors use?
Nobody (hopefully) would be using vanilla Markowitz for anything. Robust portfolio optimization is table stakes, this is not rocket science.
Oct
14
comment Which algorithms do robo-advisors use?
Bayesian techniques are also popular.
Oct
14
comment Which algorithms do robo-advisors use?
Bootstrapping, Monte Carlo with perturbations, Meucci's techniques, etc.
Oct
14
comment Which algorithms do robo-advisors use?
Some I know are using more robust portfolio optimization techniques, some are using a bit of naive risk-parity, some are using variants of Black-Litterman, those are the things that I am aware of...
Oct
8
comment How does one simulate intraday strategies which don't end up flat at the close?
Yes, if you are holding positions overnight, then you clearly cannot treat every day as a fresh start.
Oct
8
comment why many option contract price less than minimum boundary price?
Not too sure about India, but elsewhere, the risk-free rate is usually taken from a full OIS discount curve, and dividend rates are often piece-wise constant and implied from the option-implied forwards.
Oct
5
comment How to calculate volatility on intraday data?
amazon.ca/… has good coverage of this problem. Your biggest problem is going to be handling the intraday/intraweek seasonality.
Sep
15
comment How does rehypothecation cause systemic risk?
Wouldn't additional haircuts be enough to trigger contagion the more frequently collateral is reused? Doesn't require an actual bankruptcy...
Jul
18
comment Why do stocks fall so quickly? Technical explanations
Not apart from the dozens (hundreds?) of papers that have been written on the subject.
Jun
18
comment LIBOR with different tenor
Didn't you already ask this once? What happened to that question?
Jun
18
comment Can Gaussianity of returns depend on the time frame?
Yes, the variance ratio test is based upon the non-Gaussian scaling of aggregated data. Long story short, it's not always Gaussian, but nor is it completely unpredictable. "An Introduction to High-Frequency Finance" goes into the scaling properties of high-frequency data in some detail. You might also be interested in the "Epps effect" which distorts the autocorrelation and IID properties of high-frequency trade data.