New answers tagged

1 vote

$\mathbb{Q}$ measure and $\mathbb{P}$ measure, trading strategy

As people pointed out, P and Q are different because of risk aversion. Under the P measure, the payoff in bad states are worth more; whereas Q measure is risk neutral. This is similar to why people ...
  • 36
0 votes
Accepted

Find strike of an option based on a delta without option price

Let's suppose we work for a Vanilla Call Option. The formula for Delta is : $\Delta = \frac{\partial V}{\partial S} = N(d1)$ where $d1 = \frac{ln(\frac{S}{K})+(r + \frac{\sigma^2}{2})t}{\sigma \sqrt(t)...
  • 56
0 votes

Book Recommendations on Options Derivatives

Interest Rate Models: Theory and Practice: With Smile, Inflation and Credit https://www.amazon.fr/Interest-Rate-Models-Practice-Inflation/dp/3662517434 In my opinion studying fixed income derivatives ...
  • 43
3 votes

Book Recommendations on Options Derivatives

John C. Hull: Options, Futures and Other Derivatives
1 vote

How to find volatility of a 1 day option based on 2 day annualized volatility

That’s pretty close, but you should add the variances not the vols. Thus if the daily vols for Thursday and Fridayvrespectively are $v_1$ and $v_2$, we have the two equations $$v_1^2 + v_2^2= 2*6....
  • 14.5k
1 vote

How to interpret CDF($d_1$)/PDF($d_1$) from BS model ?

This is not an answer but more a comment to the given answer, that I am happy to delete afterwards. Did you compute this value? It explodes for spot below strike, is roughly 1 for ATMF and declines to ...
  • 5,170
0 votes

How to interpret CDF($d_1$)/PDF($d_1$) from BS model ?

Thinking thoroughly about the question, my suggestion would be the following: Inputs: d1 being standardized price of the underlying cdf(d1) can approximatively be interpreted as the delta of the ...
  • 41

Top 50 recent answers are included