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Results tagged with black-scholes
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user 34947
Black-Scholes is a mathematical model used for pricing options.
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vote
Accepted
Black-Scholes: Delta/probability of exercise increases with volatility
** Edited for more clarity
Its because
Stock is bounded by 0 so volatility is on log returns $log(\frac{ST}{S0})$
Option payoff is based on non log returns $\frac{ST}{S0}-1$.
Initially when vo …
- 369
1
vote
Pricing Corridor Variance Spreads
I tried (albeit not very hard) this in-house with very little success for a variety of reasons. The most important of which is the lack of data to calibrate your models. Even if you fit listed well, …
- 369
1
vote
P&L Calculation of Option Strategy
The main problem with your description is that one option is not a consistent quantity when it comes to a portfolio strategy.
The $ exposure of your option changes as the underlying price of the o …
- 369