# Questions tagged [derivatives]

A financial contract whose payoff is linked to the evolution of an underlying security.

444 questions
Filter by
Sorted by
Tagged with
59 views

### Options pricing model inversion

He cited about Roll's compound formula for finding the lead-lag effects between stocks and options. I have a similar data for National Stock Exchange's Index, NIFTY but it's daily, not intra-day. I ...
148 views

### lead lag relationship among futures, options and stock prices

I have the data of past 10 years of NIFTY (the National Stock Exchange of India) stock, futures and options and I want to show the lead-lag relationship (which reacts first, futures, options or stocks)...
65 views

### How do I calculate FX forward hedge ratio?

Suppose I have a USD holding of 1,000,000 in my portfolio and I want to convert it into EUR in a month's time. I enter into a FX forward contract of the same amount USD 1,000,000, meaning that I have ...
121 views

### Is the forward price equal to the future price?

If $f^{T_1}(t)$ is the price of a forward and $F^{T_1}(t)$ is the price of a future on some stock, both maturing at date $T_1$ and with the assumptions: no dividend constant interest rates no ...
43 views

### Local v/s global calibration for a Bermudan Option (calibrate co-terminals vs entire matrix)

I am quite new to rates modeling and I have a question on the pros and cons of calibrating to larger set of vanilla instruments v/s calibrating to an exotic's 'natural' hedges. For example, I could ...
135 views

### Do different prices under different models admit arbitrage?

There are many models for interest rate. If two people use two different models to price the same interest rate derivative, and come to two different prices, doesn't that admit an arbitrage? How ...
98 views

### Extensive list of financial derivatives and what method is used to value them

What I'm imagining is a long list of different types of financial instruments traded on the market along with the model(s) that is industry standard for valuing it. Something like: European equity ...
682 views

### What does the word “affine” mean in affine term structure models?

I am new to the field of Mathematical Finance and wanted to get an idea on the intuitive, physical and mathematical meaning of the term "affine" in Affine term structure models. Any literature ...
734 views

### bank issuing structured products

"The investment banks supplying structured products were effectively buying options from investors" How to understand this quote from this source? I would think the investors are usually had (long) ...
44 views

### Contingent Claim Bounds

In my course on discrete-time finance we derived the following equality for a lower bound for the value of a not necessarily replicable contingent claim $D$. Here we are looking at a single period ...
69 views

### Types of financial derivatives

I am looking for an explanation for different types/grades of derivatives. For example we have various asset classes: equities FX (currency) derivatives, etc. Or different types of secured debts, ...
40 views

247 views

### Synthetic FRAs using Eurodollar futures

In order to create a synthetic FRA position of 30-day FRA on 90-day LIBOR, the diagram below shows that we can enter into positions by going long a 120-day Eurodollar contract and short a 30-day ...
38 views

82 views

### Arbitrage when discounting and forward computation is done with different curves

I notice that (equity derivatives) trades generally are priced with different forward curve and discounting curve, which clearly lead to arbitrage. Is this arbitrage value too small to be ignored? How ...
154 views

### Intuition for consistent Derivative Prices under different Numeraires and Measures

This is essentially the Fundamental Theorem, however I am not asking for a thorough proof, I am more interested in the general intuition. In words, it makes sense that whatever your unit of account (...
112 views

### Calculate upper bound for put option prices?

I need to know historical option prices for backtesting. The problem is I don't have such historical data. Is there a way to calculate the upper bound for out of money (American) put option selling ...
107 views

### What is the difference between exercise and expiry date?

I know in American options you can exercise the options at any time before expiry date but in European options you can only exercise the options on expiry day. On National Stock Exchange of India the ...
522 views

### How do market makers chose the size that they quote?

A typical quote in the derivatives market may be 2.00 bid at 2.50 ask with a size of say 100x100. How do practitioners go about choosing the size of the market (how many contracts) to quote? It seems ...
58 views

### partial derivatives of multivariable function

Looking to verify whether the following formulation is correct. Suppose we have the following function, relationships: $$y=f(x)$$ $$x=g(a,b)$$ $$y=f[g(a,b)]$$ Is the below correct (including ...
92 views

### i have an option derivative question

please show that the call and the put share the same vega, i.e., please prove the following equality. do we derive the call and put equations ?
59 views

### Algorithmic trading strategies for financial derivatives

are there any strategies or considerations specifically designed for the algorithmic trading of financial derivatives, or textbooks that focus on this topic rather than underlying equities and ...
53 views

### Call price in case of AOA

I have this exercice, and for the last question, i tried to say that with lower bound, $C > S_0 - Ke^{-rT}$ which is $-8$ something but it doesn't make sense so i don't know what to do. Could we ...
505 views

### Is EONIA swap rate really credit risk free?

I have a question linked to the EURIBOR – EONIA spread (or OIS LIBOR spread). I understand that the EURIBOR - EONIA spread is a credit risk indicator of the interbank market. There is something I ...
288 views

### Estimating Market Price of Risk

I need help with estimating market price of risk. Assume money market account and two risky assets which exposed to same two sources of risks follow process: $dM(t)=rM(t)dt$ \$dS_1(t)=S_1(t)(\mu_1dt+\...
125 views

### Delta Hedging Example

I was reading Dynamic Hedging by N. Taleb and in the chapter dedicated to the delta, there is this example of a trader position in options (one-month European call, flat yield curve, forward is ...
431 views

### Cap price as bond options

I am currently struggling with model calibration of the Hull-White (or Vasicek) model to Caps and Floors. My main problem is that I am confused about the notation. In Brigo & Mercurio (2006, p. ...
75 views

### What model do market makers in equity derivatives commonly use to price, hedge, and fit the IV surface?

What is the industry standard/common model used by market makers in equity derivatives to trade across the IV surface?
445 views

### Relation between ATM, RR and BF

In FX derivative market, why does vol spread of ATM > RR > BF? ATM is the most liquid and intuitively it should have the lowest spread. Please help me in understanding the rational behind the above ...