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Taleb argues that under uncertainty, election forecasts should be seen as a Binary option. A similar thought is presented by De Finetti's principle that probability should be treated like a two-way "choice" price. Therefore, under high levels of volatility, forecast should not have extreme variation across time (equivalently, the price of the binary option ...


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A portfolio is simply the collection of all assets you own. So in all your three cases, you still have a portfolio. In a Sense, a trading strategy is a synonym for portfolio in maths finance since you only need to know how much you invest at a certain time in a certain asset. For instance, your first scenario may be described by $(0,100,0,0....)$, i.e. you ...


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I can confirm there is no error in @Sanjay graph. I obtain the same plot with Obloj correction for the SABR formula. In fact, the popular SABR approximation formulas (Hagan or the further corrections) use as hypothesis a small vol of vol. In your case, the vol of vol $\nu$ is very large ($\nu=7$) and it is not too surprising that the approximations break ...


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