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I have about 10 alphas. I assign each of these alphas a weight and then add them up to form a combined alpha. Now I am feeding this to a mean variance optimizer that considers transaction costs and ...
• 263
81 views

Literature on PAA for Rates products

There is abundant literature on pricing interest rate derivatives, but it is a struggle to find much on the science and methods behind practical Profit Attribution Analysis (PnL explain) on fixed ...
• 223
1 vote
451 views

Decompose Option price into greeks

I am trying to decompose option prices into various greeks and trying to see if I can recover option prices from various of its greeks. At the start of certain time ...
• 836
584 views

Attributing change in option prices to greek components

A noob question. I'm trying to get my head wrapped around this but getting lost, please guide. From the entry and exit prices of an European option, how do I attribute the P&L to various greeks (...
• 123
297 views

P&L explain for swap?

I try to make a P&L explanation of a swap from the delta, gamma, to the N instruments of the rate curve (money market, futures and swap). I use a perturbative shock of 1bp for each instrument of ...
• 51
478 views

Model based PnL explain for FX Options

In FX options the vol surface for a given maturity is usually described by three or five points, I.e. Atm, 25 delta risk reversal and butterfly and 10 delta risk reversal and butterfly. Then models ...
• 263
606 views

Let's say a fund's net returns are described by the following table: Long Short Total 1.0% 0.25% 1.25% 1.0% 0.25% 1.25% ... ... ... 1.0% 0.25% 1.25% After 12 months the net performance of the ...
• 31
858 views

Principal component analysis on a yield curve

When conducting principal component analysis on the yield curve, PC1 = constant (level shift), PC2 = Slope, PC3 = Curvature. How do you interpret PC>3, e.g. PC 4?
2k views

Explain daily P&L by risk factor for a portfolio of bonds and FX forwards

I was once an intern for a small bank with a portfolio mainly composed of gov. bonds, FX Forwards and time deposits. We used to report the daily P&L along with a P&L atributtion to each of the ...
• 525
1k views

Attribute P&L to PCA vectors (swaps)

I have a daily US swaps data here for 2020 https://easyupload.io/yh4rnd . I have run PCA on standardized data and got PCA matrix (and basic statistics): I also have such hypothetical portfolio that ...
• 21
692 views

Principal Component Analysis for attributing yield curve changes

I have calculated the Principal components using daily yield curve changes. After calculating these components, i noticed that 98% of the return can be attributed to the first 3 components. How do i ...
174 views

Vega of option with market derived parameters

Suppose I have a volatility model of the form $\sigma=f(X(x,y), Y(x, y))$ where $f$ is some function of the variables $X, Y$ which are calibrated using some calibration procedure with market implied ...
4k views

Good references on PNL explain?

Can anyone share good references for how PNL explain should be calculated and presented for the best use of a derivatives trading desk?
• 1,885
976 views

With a payer swaptions delta and gamma is there a method for approximating pnl for a given move in underlying swap rate? (An equivalent to the Taylor expansion for a vanilla call) Thanks!
605 views

Pnl explain using adjusted SABR delta

When looking at SABR, the starting point for a swaption's delta is the usual: $\Delta = \partial V/\partial F$ However, since we have expressed our volatility $\sigma$ as a function of our ...
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