# Tag Info

• 1,419
1 vote

### Black Scholes informal derivation - question about a term in the equation

It's the current spot price, or $S_t$. The "next chapter" might show if/why they drop the subscript for this approximation, but in the end the variable in the black-scholes equation will be ...
• 1,073
1 vote

### Hull's book - Futures option's rho

Your option has exposure to interest rates for two different reasons: The discounting of (expected) terminal payoff. The forward (~cost of financing of the delta hedging). Mathematically, if you ...
• 604
1 vote

### In literature, is IV constantly adjusted during option delta hedging?

You need to hedge dynamically (ie, with changes in IV/delta) to accurately hedge your position. This also winds up being a potential risk for a covered option position if there are big moves or ...
• 1,578
1 vote
Accepted

### Dividend yield on ASX 200 (XJO) index options

Here is an answer from the ASX for anyone interested: You might want to consider using the Black 76 model. https://en.wikipedia.org/wiki/Black_model XJO options are over the XJO index however the ...
• 219
1 vote
Accepted

### Why is the black-scholes model arbitrage free when σ>0?

If $\sigma=0$ there is no randomness: the spot follows a single deterministic path. That is, the measure consists of a point mass at that path. Any equivalent measure can again only give a point ...
• 1,855
1 vote

### How to interpret negative asset volatility numerical results in Merton model?

Although I, admittedly, did not go hunting through your code for an error, I have seen this phenomenon before using this model. This model (like all other models) isn't perfect. This is especially ...
• 111

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