New answers tagged options
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$\mathbb{Q}$ 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 ...
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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)...
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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 ...
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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....
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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 ...
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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 ...
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