# Tag Info

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As you can see from the wiki page, the delta of a put is $$\Delta = -e^{-qT}N(-d_1)= -e^{-qT} \left(1-N(d_1)\right)$$ Recall that this $\Delta$ is the derivative of the value of the put $p$ with respect to the value of the underlying stock $S$: $\frac{\partial p}{\partial S}$. So this means that if the underlying goes up by 1, the price of the put change ...

3

The process of setting aside an amount to pay off debt (without actually paying down debt) is known as "defeasance." This can be achieved by setting up an escrow account or other bank account, where "dedicated" funds are deposited so that the total amount (counting "locked in" interest), will be enough to pay off or "defease" the debt. The payments can be ...

3

Here's one scenario: dealer is long a deep in the money American put (say strike is K and the current stock price is S < K ), versus being short a european put with the same strike and final expiration. If the dealer exercises early the American put, he is now short the European put at K with a short stock hedge against it. Thus he is synthetically ...

2

Here's the example of what is in the quote: dealer is long an ITM call. As a hedge the dealer is also short OTM put (with the same strike) and short stock. This is a "riskless" position, equivalent of a bond. The underlying pays a dividend, and a day before the ex-date dealer exercises the call. The shares that dealer received from exercise are netted ...

2

This spread can't be statically synthesized. However you can synthesize it dynamically by trading in the underlying contracts. You would first value the option using standard theory (this involves solving a two-dimensional PDE, or using Monte Carlo) to get a price $V(F_1,F_2)$ in terms of the prices of the underlying futures contracts. Then the holdings in ...

2

What you are doing in the formula is just linear interpolation. This is probably fine, if there was some hindrance such as a seasonality effect, the market would probably contain a contract at that tenor. Just convert to fractions of a year by some day count convention. Say ACT/365 I don't see why. The futures price should just approach the spot. It it is ...

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The arch package have time-series bootstrap methods: The arch package in Python have implemented the stationary (block) bootstrap (among others, see this link) of Politis and Romano (1994), that keep the bootstrap re-samples stationary and avoid breaking the dependence structure in the data. This method is commonly used when bootstrapping time-series data. ...

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You seem to ask the following many times: "Under Put-Call Parity shouldn't we add the carrying costs to only the stock price? And then subtract the carrying costs only from the call and put?" Those three equalities are not definitions. In the first equation, you do not add carry to the stock price unless you move it from RHS to LHS by adding it to ...

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As mentioned in the comments, you will most likely not find much literature on simple synthetic positions such as the synthetic long stock. This is simply a way to obtain a highly leveraged version of the same risk profile as a long stock position - hence, analyzing the risk profile is redundant. However, there are a few papers on taking more advanced ...

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I figured out that the correction term should not be $\alpha\cdot\delta + \beta\cdot\delta^2/2$ but rather $\alpha+\beta\cdot\delta/2$.

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Yes, that's correct: Formula 5.2 (FCa / FCb)ask = (FCa / DC)ask ×(DC/FCb)ask (FCa / FCb)bid = (FCa / DC)bid ×(DC/FCb)bid Where FCa and FCb are the two foreign currencies and DC is the domestic currency. source: https://www.investopedia.com/exam-guide/cfa-level-1/global-economic-analysis/spot-market.asp

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You can see how to calculate cross currency rates at FX and MM training disclaimer I authored the page

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