# Tag Info

Accepted

### Can the risk neutral pdf derived from Breeden-Litzenberger Method be used to calculate vega and theta?

No, vega cannot be derived in a model-free manner. The reason for this is because in contrast to delta and gamma, there are multiple definitions of vega, and an even deeper underlying reason may be ...
• 1,906
Accepted

### Replication of the payoff of a chooser option

Consider a European chooser option which allows you to choose at time $\tau$ if you want to receive a put option and call option with maturity $T>\tau$. At time $\tau$, using the put-call parity, ...
• 16k
Accepted

### Confusion about payoff for an option

A European put, which you're describing, gives the holder the right to sell the asset $S_t$ at time $T$ for price $K$. From the putholder's perspective, they receive $K$, but they have to part with an ...
• 625

### Pricing European Call Closed Form Spread Options in Python

Firstly, you can really use Margrabe's formula (as @Rylan said). It's exact solution, so there is good first test. You can use numerical integration (scipy methods for example) for test your Monte-...
• 46
1 vote

### Describing the volatility skew with a set of options

It is not necessarily wrong to include ITM options in your analysis of the volatility skew, but it may not provide as much insight as focusing on the ATM and OTM options. The volatility skew is often ...
• 368
1 vote
Accepted

### Why do ATM options intuitively have higher Time Value (Extrinsic Value) than Out- and In-The-Money options?

For an OTM option, time value represents the likelihood that the option ends up in-the-money, increasing its value over its current "intrinsic" value of zero. For an ITM option, time value ...
• 1,441
1 vote

### The partial derivative of a call option with respect to $t$

If you want the full dependency on the time t of a process, as the process moves forward, you have to calculate and study the full Ito derivative. But regarding your question : It depends on what you ...
1 vote
Accepted

### Understanding American option payoff at T+0

In general American options behave similar to European options but face another arbitrage boundary because of early exercise. For example in the case where the underlying price rises to $S = \\\$120\$ ...
• 175

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