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Questions tagged [options]

A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.

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37 views

Why Can I not estimate a CVAR from Heston Model

I fit the parameters of Heston model, using option data for SPX. Now I have the process S and P 500 is expected to follow. I make 100,000 simulations of this process and then calculate the expected ...
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1answer
41 views

Futures options data [duplicate]

I've been looking into futures options data for my thesis. What are some sources to get futures options data for an affordable price?
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0answers
32 views

Barrier Shifts - necessary for up-and-out call / down-and-in put?

Recently I came across the topic of barrier shift for barrier/digital options. I found that most examples centred around down-and-in puts / up-and-in call / digitals. I am wondering if we need ...
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0answers
27 views

Cash-or-nothing and Asset-or-nothing price derivation

I was wondering how to derive the price of a cash-or-nothing and asset-or-nothing option by trying to work out the expectation under the risk-neutral measure, while assuming that the underlying ...
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0answers
30 views

Importance sampling Heston

I've tried to understand importance sampling first with Black Scholes and the procedure seams more or less ok to me. Now, is there anyone able to explain to me how things should be done under Heston ...
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1answer
38 views

How is FX cross rates options are priced?

Say I have market for EUR/USD and also USD/CAD, how would EUR/CAD would be priced and hedged in practice? What are good papers/book chapters to read on that? (Assuming basic knowledge already on ...
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1answer
37 views

Basic Replication of European Call Option

I am looking at the very basics of replicating an option with a portfolio of risky and risk free assets. As such we can define a portfolio of $x$ no. of shares, $y$ bonds & $z$ options at time $(T)...
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0answers
23 views

“1.#QNB”, “-1.#IND”, “-1.#IND00”, “1.#QNAN0” for CBOE Option Greeks

Currently in the process of importing options historical .csv data from the CBOE Datashop Some of the greeks contain the values 1.#QNAN0, ...
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0answers
27 views

I am trying to understand how to price sort of basket option

I am asked to price exotic option as a part of interview process. As far as I understand it is a sort of basket option. There is a bundle of shares: AAPL (Apple), NVDA (Nvidia), AMD (AMD), INTC (...
3
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1answer
68 views

Usages of variance swap

I’m interested in variance swap. Considered from its feature, variance swap is used for betting the (historical) volatility of underlying asset. If we use it for hedge tool of Vega or Volga, does it ...
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1answer
72 views

Why futures pricing not calculated like options?

I have read about futures and options ( from online resources ). I only have the basic understanding,not math heavy ( for eg. for Black Scholes I know only the intuitive idea from the khan academy ...
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0answers
39 views

Option order imbalance

Currently studying the paper: HU, Jianfeng. Does Option Trading Convey Stock Price Information?. (2014). Journal of Financial Economics. 111, (3), 625-645. Research Collection Lee Kong Chian School ...
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0answers
43 views

Delta autocallable note

Ok, can someone explain to me how to compute the delta of an autocall ? I tried to read books such as Exotic Option and Hybrids from Bouzoubaa and Osseiran or even publications but something is ...
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0answers
8 views

Size in CBOE options quote table

I am looking at an example of an options quote table from the CBOE. I was wondering what "Size 1 x 3" refers to.
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0answers
24 views

Barrier crossing probability for Hull White

I am trying to price a barrier option using the Brownian Bridge barrier crossing probability. The material I have seen online are mostly for simple Brownian motion or GBM. I am interested in the Hull ...
2
votes
1answer
66 views

Risk management tools for long term Gamma/Vega sellers subject to margin calls

TL;DR: if you're a retail investor and you systematically sell long-term vertical spreads while staying Delta-neutral, your main risk comes from Vega and the Gamma of opening gaps that can throw you ...
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0answers
23 views

Current or future risk-free rate for Black's futures options pricing?

When using the Black-76 model for pricing options on futures expiring at time $T$, should I use the current LIBOR rate or should I use the current rate of Eurodollar futures expiring around time $T$, ...
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1answer
47 views

Strategy to write uncovered put and call

I found a strategy called "covered combo" where you sell 1 put, 1 call, and purchase 100 shares of the underlying; is there a name for doing this without purchasing the 100 shares?
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1answer
40 views

Why can't an options writer volunteer for assignment on exercise

I'm asking more for a policy perspective. I called the brokerage firms I use and asked about volunteering myself for assignment if a written OTM option becomes ITM and a holder somewhere exercises. ...
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1answer
29 views

Is the assignment of exercised options “truly” random

Everyone seems to say that assignment of exercised options is random; does it just appear random to an outside viewer or does the exchange pick a name from hat for assignment?
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1answer
52 views

ATMF FX straddle delta

I am trying to price an ATMF FX (say Usdidr) straddle - the fxdelta for call and put leg are quite different with put fxdelta being higher than call delta. (Absolute values) Why would this be the case?...
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1answer
102 views

Buy and Hold P&L for options

I want to calculate the buy and hold P&L for an option in the following "extreme" scenario: Valuation date = t Calculate B&H P&L from t to t+1 Option maturity: t+2 ATM option Due to the ...
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1answer
55 views

Benefits of systematically trading OTC options instead of exchange-traded options

Is there a case to trade liquid OTC options (FX, single-name equity, swaptions, etc.) instead of exchange-traded index options in a systematic strategy?
3
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1answer
115 views

Conditional Probability - Geometric Brownian Motion

Background I am trying to find a way to price a variant of a gap option by using closed-end expressions. What makes this option a bit tricky is that it can be exercised at four predetermined dates (t=...
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2answers
86 views

P&L Calculation of Option Strategy

I have designed a call writing option strategy, where I am rolling the options upon expiry, i.e., my portfolio consists of one short call position at any given time. I have a time series of the value ...
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0answers
29 views

Delta of an option under assumptions of Bachelier options pricing model

My question is about the computation of deltas under the assumption of a Bachelier pricing model. Am I right in assuming the under the Bachelier options pricing model (with assumption of normal ...
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1answer
40 views

Swing option pricing in QuantLib-Python

Is it possible to use the QuantLib python wrapper to price swing options? I've seen the QuantLib Github repository contains a C++ implementation, swingoption.cpp, but have found no reference to swing ...
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0answers
23 views

Importance sampling procedure

I need someone to explain me the importance sampling method. There are several topics but the drift parameter $\theta$ when adjusting is never discussed. I read publications where $\theta$ was used ...
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0answers
32 views

Distribution of maximum of stock price for lookback option

I'm trying to solve the following question: I've solved part (a) and got: $$\gamma = N(-d_-)e^{r(T-T_0)} - N(-d_+)$$ $$-d_± = \frac{(r±0.5\sigma^2)(T-T_0)}{\sqrt{\sigma^2(T-T_0)}}$$ I'm stuck on ...
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0answers
34 views

Calendar Spread Options (CSO) Pricing Model

I've explored a number of CSO research papers and still cannot comprehend how to effectively use correlation and approximations to price CSOs in crude oil. Can someone please provide some C++ or ...
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0answers
30 views

STOXX 50 - SX5E expiration date

I'm trying to get information about the expiration dates of the SX5E. I'm mainly concern with the month expirations, however I cannot find the rule (or the historical dates) to use in my model. Does ...
2
votes
1answer
113 views

Option Strategy: Python Implementation Advice

I've been tasked to create and backtest an option strategy. The strategy, in vague terms, is to essentially write call options on securities in a universe, i.e., selling insurance. I have an idea of ...
0
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1answer
36 views

How skew in vertical put spreads change the payoff?

An spx four strikes wide Put Spread from at the money has a payoff ratio of 1 to 2 meaning if the Premium on the spread is \$10 your reward is \$20; yet the corresponding Call Spread with the same ...
2
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1answer
110 views

4 Leg Synthetic Stock Options Strategy

Traditionally, a synthetic stock option involves buying a call and writing a put at the same strike price. I recently encountered an ETF prospectus that claims to achieve this exposure with a four leg ...
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0answers
28 views

Joint risk neutral distribution

If I have stock index option and individual stock option data, where individual stocks are components of this index, can I estimate joint risk neutral distribution of underlying stocks
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1answer
83 views

How could one trade volatility skew if you think it's too flat or steep?

We all know that you can trade on a forecast of volatility by dynamically hedging, but I'm wondering if there's a similar technique where in you can trade the skew specifically? Let's say you travel ...
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0answers
32 views

Books om FX options [duplicate]

What are good books about currency options? Unfortunately most books explain option from equity or index options perspective. I'm mostly interested in FX options. Not books on all options like ...
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0answers
30 views

Estimating/Rule of thumb for volatility skew from daily returns? Simple example?

Let's say I have a stock with very limited information, I have 5 days (1 weeks) of returns. It moved 0% for 4 days, and then 10% on the 5th. Let's say I assume the stock will move in a similar fashion ...
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1answer
54 views

option price change

I am trying to match change in European Call option price to greeks using the calculator here e.g. for S=95, K=100, r=0, V=25, t=5 and dividend=0, I get ...
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3answers
213 views

From Butterfly Price to Probability of $S_T$ Falling within a Range

If a butterfly in the limit represents a probability (by the Breeden-Litzenberger result), what can be said about the relative likelihood of a random variable $S_0$ from the price of a vanilla-option ...
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0answers
43 views

Portfolio Analysis for Non-Linear Products

How does one apply modern portfolio theory to optimize the allocation of a portfolio of interest rate derivatives?
5
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2answers
256 views

Portfolio Analysis Interview Question

Suppose you have a portfolio of 100 options. Then I give you a subset of trades in which you can make. The trades consist of possible buys/sells of different options from different clients. Discuss ...
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2answers
175 views

What is the strategy for this piece of information

Heavy Math background, very light finance background: Suppose I have a stock $S$ whose price is measured by the market once on times $t_0$ $t_1$ $t_2$. Now the market has some opinion for how the ...
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0answers
32 views

Importance sampling weights

I read topics on that subject on this forum but nothing is approaching my problem. Say I'm dealing with a 1Y max put callable with an European Down And In barrier. Say $S_0=100$, barrier $H=80$ and $...
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0answers
38 views

AFV Model Implementation for Convertible Bonds

I am reading the original AFV model paper for pricing convertible bonds. https://cs.uwaterloo.ca/~paforsyt/convert.pdf The paper is very technical and I am having trouble finding the actual PDE's to ...
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0answers
81 views

Compo Feature in Asian Option on Futures

I'm pricing an Asian option on futures using Turnbull–Wakeman (other suggestions welcome) where the average is defined as $A _ { t _ { 1 } , t _ { n } } ^ { A , f } = \frac { 1 } { n } \sum _ { i = 1 }...
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1answer
50 views

VaR for Options portfolio

I'm asked to estimate VaR for Options portfolio. Firstly, I wanna try to estimate VaR for AAPL stock european call option using Historical Simulation but I can't find any Historical Data. I tried ...
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0answers
34 views

Do you receive premium from selling VXTY futures?

I am having some difficulty understanding VXTY futures and how they are priced. The contract specs say it is priced off of OZN options (10yr UST futures options). I understand there is a premium ...
1
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0answers
48 views

Control Variate Barrier Basket Option

I need to improve the speed of convergence of PRNG Monte Carlo. I'm opening a new thread for that purpose and I have question / need confirmation about the algorithm. I'm pricing options with Heston, ...
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0answers
28 views

Finding the distribution and moments of returns with GARCH models (in R if possible)

I understand the GARCH type models and I know how to fit a model to a time series. But, there is a paper which calculates the moments of the distribution of returns (Variance, Skewness, and Kurtosis) ...