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Python and R


Aug
16
comment How to derive the implied probability distribution from B-S volatilities?
Thank you very much. Now off to program it......
Aug
12
comment How to derive the implied probability distribution from B-S volatilities?
I am indeed looking for the implied distribution as from there it's simple enough to do the qqplot. My first priority is an empirical approach, as the target audience of this visualization will want to use it to get and idea of which parts of the surface are cheap/dear, by visual comparison to historical performance of the pair. This will not (yet) be for a trading model. Of course I would like to be able to show this in an intuitive fashion (with all the usual caveats about historical v future returns, and low-probability event risk). Thank you for your interesting starting points.
Aug
11
awarded  Promoter
Aug
9
comment What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?
I'll add one final point, and that's about culture. The "culture" of the front office is taking risk, wherease the culture of the CVA desk is inherently to reduce risk. If you're asking this question in relation to career choice, you need to keep this in mind, as the training you will receive and the instincts you may develop on markets, will obviously be affected.
Aug
9
awarded  Commentator
Aug
9
comment What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?
Put it this way. The term "front office" of a bank inherently involves selling. Traders, Researchers, and Salespeople are engaged with providing services to their clients, in various ways. That is not the case for CVA - they are there to help create the conditions for those services to be offered by the front office, by optimizing one aspect of risk. Indeed, it is important that CVA does NOT report to front office, as this would be a conflict of interest. Keep this in mind though: CVA people have all the skills and training to become excellent prop traders or portfolio managers.
Aug
9
comment What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?
yes indeed, they are fully active in the external market, but then they're market takers, not makers. In other words, they're the client. Perhaps my characterization of "middle office" is misleading, now that I think of it. Rather, they're part of the risk control function, which some banks breakout separately into counterparty risk.
Aug
9
awarded  Teacher
Aug
8
revised What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?
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Aug
8
revised What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?
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Aug
8
answered What is the role of Credit Valuation Adjustment (CVA) desks in investment banks?
Aug
8
revised How to derive the implied probability distribution from B-S volatilities?
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Aug
8
asked How to derive the implied probability distribution from B-S volatilities?
Jun
20
comment How do I compare implied and historic volatility?
@vonjd I have found the following two papers to be interesting wrt to this question as well: bcb.gov.br/ingles/estabilidade/2002_nov/ref200201c62i.pdf and rbnz.govt.nz/research/discusspapers/dp02_04.pdf
Jun
17
awarded  Scholar
Jun
17
accepted How do I compare implied and historic volatility?
Jun
17
comment How do I compare implied and historic volatility?
thanks for the links to the paper and the book. So there is no point in trying to compare the skew and kurtosis of the historic distribution, to the risk reversal pricing and smile of the curve, analagous to how macro traders will compare historic with implied ATM vol? That's what I was wondering basically. Second, what do you mean by overlapping data? I am using bloomberg "last price" closing prices, so there should be no overlap? For completeness I take log returns of that series and multiply by sqrt(262) to get the annualized vol. What would you do differently?
Jun
6
comment How do I compare implied and historic volatility?
@vonjd no with Excel. I am shamed to say that I while I am an experienced trader and programmer, I am not a quant, and am only beginning to learn R. So the data comes from Bloomberg, which gives the ATM, RR, and flys for each tenor and delta and I have backed out the outright vols for each point.
Jun
6
revised How do I compare implied and historic volatility?
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Jun
6
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