New answers tagged options
4
votes
Wrt speed, how optimised is QuantLib's Heston pricing class?
QuantLib does a lot of things behind the scenes that provide convenient functionality but get in the way of pure speed. For instance, in your example code, when you write
...
- 7,003
0
votes
0DTE volatility and greeks
0DTE options don't expire on market close (i.e 4PM) but the settlement happens in after market hours. If the market is pricing a move in that time your greeks will be useless, you can adjust for that ...
- 958
0
votes
Implied volatility greater than realized volatility at all strikes?
Standard realized volatility calculation only corresponds theoretically to ATM strikes not OTMs. Unless you have a different definition of realized volatility you cannot compare it to OTM implied.
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- 958
0
votes
Constructing payoff with options
Just to add the the previous answer, the additional payment is:
$$ \min\left(\max\left(0,170(X-25) \right), 2550\right) $$
This can be algebraically manipulated too (chasing for standard option ...
- 5,008
1
vote
Constructing payoff with options
This is essentially some form of commodity-linked structured note (this case being oil). In this case, such a structured is a Leveraged Participation note with Cap in industry lingo.
In terms of how ...
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2
votes
How to get the fair value for an option with variable strike?
You need a corporate finance type analysis for this. I am assuming you are valuing that option for a PE company or something of that sort.
Create scenarios for the company (revenue, cost, margins, ...
- 8,042
2
votes
0DTE volatility and greeks
You don't. The problem is that when the time horizon is so small, if the options isn't perfectly ATM, the gamma and vega $\approx0$, and delta $\approx1$. A small shift in the underlying further OTM/...
2
votes
Accepted
Floor vs Receiver Swaption with Equal Strike
This is a classic question and has been asked/well-addressed several times in this forum in prior answers. Suffice it to say, a $K$-strike receiver swaption $\leq$ a $K$-strike floor and this ...
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0
votes
Floor vs Receiver Swaption with Equal Strike
For single curve pricing (same funding/discounting and forward curve), with index $L(T_{i-1},T_i)$ and its $T_i$-forward expectation $F(T_m,T_{i-1},T_i)$ (forward rate of the index as of $T_m$), we do ...
- 5,008
2
votes
Floor vs Receiver Swaption with Equal Strike
I'd say the floor should definitely always be worth more than the swaption.
The vol on the swaption is an average of the expected vol of forwards (averaged to some extent). Intuitively it makes sense ...
- 361
0
votes
How do we hedge option vega practically?
Just adding my 2 cents. The skill of the role is to collect bid offer on average. Therefore, there will most definitely be times where your positions carry you out and you are forced to lose some or ...
- 361
0
votes
How do we hedge option vega practically?
Without losing money is a difficult one, just read a book that said that you can hedge vega with an at-the-money straddle. If you are the selling side, the only downside is that straddles require more ...
0
votes
Put-Call Parity; Time Value of Money
Mathematically (not economically) speaking, an ITM (OTM) call option should be worth more (less) than the OTM (ITM) put option by a value equal to your "IV" (spot minus strike). Also, IV in ...
- 559
2
votes
implied volatility for close to expiry ATM options vs VIX
This question was asked the day before Thanksgiving ? Then an option that expires in 3-4 days is Friday ? Or Monday ? It doesn’t much matter, the point is that the market doesn’t expect much action ...
- 16.6k
2
votes
implied volatility for close to expiry ATM options vs VIX
Bonus: Dividend yield concerns the underlying, not the option. It is a cost of carry no arbitrage logic that is used to price options and as such you need to take dividends into account.
The VIX index ...
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1
vote
Accepted
How can I price this option?
A butterfly (option) is an option strategy with the payoff structure like below (disregard the axis labels, just take note of the structure):
There are 4 ranges you mentioned in your question:
$0 \...
- 559
1
vote
Is Lookback option more path-dependent than an Asian option
What types of options are "more" path dependent than others is not well-defined. The cited distinction -- full-path dependence versus single-point dependence -- is somewhat useful in the ...
- 14.7k
3
votes
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, ...
- 15.2k
0
votes
Implied volatility greater than realized volatility at all strikes?
Most of the time, but not always. When a trader underwrites an option (selling a call or put), they do not get the choice to exercise - the buyer has the choice. So the buyer pays a "premium"...
2
votes
Accepted
If there was a way to back out implied volatility (IV) from a stock, would it be the same as the IV backed out from an option on that same stock?
Yes, IV is indeed possible, at least in theory, to back out of stock prices. This lies, I would say, in the core of the so called structural bond models, which, as far as I know, started out with ...
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