# 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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### option chain data visualization, sunburst

I think option chains are not represented in the best way. With more and more options products coming out and trading on the various exchanges, I see vendors struggling to keep up with a good way to ...
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### What is the most convenient data structure for backtesting a model of futures options prices?

I have an empirical model for the dynamics of futures prices in a particular market that I have implemented using a long series of the front five contracts. (I account for the roll in my model.) I ...
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### Basket option density in BS model

Let X and Y be two GBM’s, they have each a univariate log-normal distribution for some time t, that is $X_t\sim{LnN(µ_x, σ^2_x)}$, $Y_t\sim{LnN(µ_y, σ^2_y})$ and $Z_t=[X_t,Y_t]\sim{ MvLnN(μ, Σ)}$ ...
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### Libraries for calculating options strategy-based margin

Hopefully, this is an acceptable question in this forum, even if it isn't analytically focused. As part of an effort to analyse the effect of different option trade structures on a portfolio, I need ...
251 views

### implied volatility and strike price

Assume for simplicity that the expiration time of an option is $1$ the initial stock price is $1$ and there is no dividend yield and the risk free return is $0$. How is it possible to show that the ...
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### Arbitrage free price of a derivative when the price is collected over the lifetime of the derivative

Let $X_t$ be an american style financial derivative with random exercise time $T$ where $t$ and $T$ belongs to some finite set $A$. Buying this derivative requires the buyer to pay $p_t$ up to time $T$...
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### How companies choose earnings release dates, & effect on Implied Volatility

A company's earnings release date significantly affects weekly or monthly option prices/implied volatility. For companies that typically release earnings on the cusp of monthly options expiration, ...
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### Calculating dealer gamma imbalance/exposure for an options strip

Have seen this being done for years (primarily by J.P. Morgan and a couple other bank research desks) and am attempting to re-create for my own personal research. I’ve read the forums on here but no ...
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### 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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### pricing option with two stocks

Let $\left(S_t^{(1)}\right)_{t\ge0}$ and $\left(S_t^{(2)}\right)_{t\ge0}$ be the price processes of two stocks with dynamics  \begin{align} & dS_t^{(1)}=\sigma_{11}S_t^{(1)}dW_t^{(1)} \...
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### Risk neutral measure in exponential levy model

Is there a method of finding a risk-neutral measure for assets driven by the levy process? I understand there is the esscher transform but I think it tends to transform the processes into ...
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### Measuring implied move priced into an event

It's well known that options price in an expected move in the underlying going into events, such as earnings announcements. I currently measure this implied move by computing the forward variance ...
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### Is there an arbitrage free option model that treats volatility as a deterministic function of strike?

I am trying to get a good understanding of the different models out there, and thus be able to study hedging errors, and strengths and weaknesses. My understanding of the Local Volatility model in ...
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### Alternative Method for Determining Option-Implied pdf

As I am refining a pricing model to incorporate skew, and not just ATM volatilities, I need to create random realizations of the underlying consistent with the skew-implied pdf. When searching, one ...
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### Which securities have expirations more often than monthly?

I'd like to explore buying low-cost calls close to the money, so I'm looking for low time values in options premiums. This happens near options expiration. Unfortunately, most options expire on the ...
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### Structured Energy Option Pricing

Let's say I have an option with the following terms. This is for an energy product (ie natural gas) The contract will last for 6 months The payoff is the difference between the first of month index ...
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### Higher Order Greeks

In studying options pricing a while back, I had learned of the higher order sensitivities of of Speed and Color. Speed was the rate at which the gamma changes with the underlying. Color is a ...
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### How to estimate option implied skewness and kurtosis in R

Suppose that i have data that for each day i have more than one option, either put or call. I.E. I have more than 20 put options and 20 call options for each specific day. What is the way to estimate ...
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### Match different option high frequency databases

I downloaded the “E-mini S&P 500 (Dollar) Options for 1/10/11” Top-of-Book (BBO) data. If you are interested you may download the data from the following link (approx. 80MB zipped and 1GB unzipped)...
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### Are there academic papers on the 'term structure' of adverse selection for futures and options?

By term structure I mean a non-stationarity in the pattern of intraday adverse selection as a given instruments approaches its expiry. Note that I am interested in the adverse selection on the ...
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### Forecasting amount of slippage in executing option spreads

Is there a good quantitative model to estimate how much slippage is required to execute a particular option spread trade? For example, let's say you want to execute an Iron Condor. Given X, Y, Z ...
203 views

### How to price an option with two volatilities?

Imagine you have two volatilities, the second which is "activated" when the stock crosses a barrier called $p_b$. The present price is $p_1$. ($p_b>p_1$). This can be used to price options after a ...
231 views

### What is the longest number of consecutive days that options implied volatility has stayed “extremely high” for any particular underlying?

Curious as to whether or not there is any sort of all time record. Any index, future, or stock will do. Volatility must be well above the average 1 year volatility for all periods.
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### Correlation sensitivity of Rainbow options

I read from various sources (eg. Exotic Options and Hybrids, M. Bouzoubaa) that the correlation sensitivity of Rainbow options (say a call price on a basket made of 50% of the best stock, 20% of the ...
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### Pricing of future options

I have the following question on futures options: There is a Black’s model, which is a variant of the Black-Scholes formula that is used to price stock options. The Black’s model prices future ...
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### Understanding the notion of future options

I am currently studying different types of option-related derivatives and I am quite confused about the notion of “futures options”. My textbook says that A futures option is the right, but not ...
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### How to shock the IV surface w.r.t VIX and keep AOA

I have to compute the sensitivity of a set of option prices on a single sotck (range of tenor is over the whole surface) to an increase of 100% in the VIX.. and I am trying to get to the most ...
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### Does convexity in the IV space means convexity in the price space?

Let's assume that we only look at OTM options to construct a Risk Neutral Density (RND). As the RND is the second derivative of the price of the option with respect to the strike, we would expect ...
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### Rainbow option pricing formula under *Bachelier* model

Let's consider a call on min option on two underlying arithmetic Browniation motions $V_t$ and $H_t$ (no drift). Let $P_t$ denotes the price process of the option, $r$ the riskfree rate, $\tau$ the ...
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### Jamshidian's trick for Swaptions

Following Brigo$^1$ p.77, we can decompose the price of a swaption as a sum of Zero-Coupon bond options (Jamshidian's Trick). To do so, the authors suggest to find $r^*$ the value of the spot rate at ...
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### How to price Swaptions with short rate models?

I have specified a (Lognormal) short-rate model (non-affine) under the Risk-Neutral measure $Q$ as a shifted exponential vasicek: \$ r(t) = e^{y(t)} + \phi(t)\\ \text{with} \quad dy(t) = \kappa(\...
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### Example of optimal delta hedging in G. Barles, H.M. Soner option pricing paper

There is a paper Option pricing with transaction costs and a nonlinear black-scholes equation by Guy Barles and Halil Mete Soner. And there is a section about optimal (delta) hedging, which I do not ...
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### Modeling market sentiment and pricing options by volume, open interest

Are there any empirically-proven methods/formulas for weighting IV surfaces, pricing a discount/premium in an option, and/or adjusting any of the 1st- or 2nd-order Greeks for the magnitude (volume or ...