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1d
comment how to use known premium of options to determine premium of options with another strike?
@MattWolf I should have said "bilinear" or something. In other words, it looks like a line to the left of the strike price and a different line to the right of the strike price (forming sort of a V shape, but the two sides of the V have different slopes). If you still disagree, let me know, and I'll explain my position further.
2d
comment how to use known premium of options to determine premium of options with another strike?
The volatility smile, in my experience, is nearly linear near the underlying's current value (but with different slopes on the two sides). With a sufficient number of data points, you could build a reasonably accurate model.
Oct
19
comment Moneyness and option prices
If you do that, you'll have to adjust strike prices as well. What are you trying to find in/from the data?
Oct
18
comment Historical Data on $/yen forward exchange rates
Would that be the same thing as a currency future?
Oct
17
comment Can we trade option spreads with more than 4 option legs?
cboe.com/cob/cob.aspx may or may not be helpful.
Oct
8
comment option pricing with limitation on the change of underlying daily changes
Note that +-X% isn't actually symmetric. For example, if a stock went up 5% and then went down 5%, it would be at 99.75% of its original value (1.05*0.95=0.9975). Perhaps limit the log of the price to +-X from the original price? Otherwise, you'll need an asymmetric distribution.
Oct
8
comment How to measure if variance is greater at a certain time of day?
Couldn't you just look at hourly highs and lows (for example?)
Jul
2
awarded  Curious
Jan
31
awarded  Yearling
Jan
31
awarded  Yearling
Jan
18
awarded  Popular Question
Dec
17
awarded  Nice Question
Jan
31
awarded  Yearling
Nov
4
comment Do binary options make any sense?
I short binary FOREX options to hedge my long FOREX position, and don't really think of them as gambling.
Nov
4
asked Can binary model lead to non-normal distribution?
Oct
25
comment Can you replicate an option on an arbitrary basket of stocks?
We're quants. There are no commissions. There is no spread. Our biggest problem is getting hit by those damn frictionless physicists!
Oct
25
comment How to extrapolate implied volatility for out of the money options?
Re Jiang and Tian, if your extrapolated volatility is linear (fixed slope), don't you eventually have further-out-of-the-money calls costing more than nearer-out-of-the-money calls?
Oct
20
comment Can you replicate an option on an arbitrary basket of stocks?
I disagree with Tal. It can be done, but, unless you assume perfect liquidity and zero commissions, the incidental costs would be too high.
Oct
17
comment Probability distribution of maximum value of binary option?
I'd settle for a non-closed-form solution or approximation. This could be modeled as a random walk with drift, but the drift itself changes with each step.
Oct
16
comment Probability distribution of maximum value of binary option?
Good point. I was thinking Black-Scholes.