5 votes

Does it matter that Bachelier IV differs from BS IV for a given option price?

Neither of them is correct or incorrect, these are just two different numerical inputs that one should plug-in into two different formulas to get the market price of an option given all other ...
user avatar
  • 301
5 votes

Compute delta from the option price without vol input

A number of models used in options pricing, but by no means all, are homogeneous of degree 1 in spot price and strike. This means, $$ C(\lambda S, \lambda K) = \lambda C(S,K) $$ If you differentiate ...
user avatar
5 votes
Accepted

Compute delta from the option price without vol input

In most (all?) practical cases, Delta is a model-dependent measure; you need a model to compute it. Black-Scholes, Heston, ... each model has a formula for the (call) option price $C$ and its Delta $\...
user avatar
  • 5,378
4 votes

Boundary condition issues for Black-Scholes PDE using finite-differences

Alright, so I solved my issues here. Since it might be useful to others stuck on the same thing, I mention it here. The problem I described about assuming the second order term was equal to zero is ...
user avatar
2 votes
Accepted

Negative-gamma delta hedging (for a call option writer): how will the stock price affect the portfolio profit?

Yes the p/l profile is the reflection of the yellow line so it appears that the option writer always loses money. However the option writer benefits from time decay, denoted by the Greek letter theta....
user avatar
  • 13.7k
1 vote

List of packages in R for options pricing?

A newer package for option pricing, and for computation of Greeks and implied volatilities is the package greeks, which I have written.
user avatar
  • 11
1 vote

implied volatility and strike price

Notations: $T,K$ are the maturity and the strike of a vanilla call of price $C(T, K)$. $(S_t)_{t\in [0,T]}$ the price process of the underlying. $\mathbb{Q}$ is the risk neutral measure. $x(T,K) = ...
user avatar

Only top scored, non community-wiki answers of a minimum length are eligible