# Tag Info

1 vote

### What is the Fair Strike in a Var/Vol Swap and how does it relate to its price?

Vol and Var swaps are less 'swap' and more 'forwards'. There's no intermediate transfer of interest before maturity. Contracts will specify how much margin to be posted initially, as well as the ...
• 399
1 vote

### What is the Fair Strike in a Var/Vol Swap and how does it relate to its price?

The comments of nbbo2 and AKdemy and the answer by Newquant are correct. In the following, I am trying to expand on their comments and give an explanation which might clarify some concepts for a ...
1 vote
Accepted

### How to calculate expected value for an underlying contract and expected value for an option?

In options trading, an option position refers to the ownership of an option contract or a combination of option contracts, whereas an underlying position refers to the ownership of the asset or ...

### How to use Ta-Lib to calculate the ewmstd?

As you say, TA-Lib does not have a built-in function to calculate the exponentially-weighted moving standard deviation. You can use ta.EMA in your function. Is this what you are looking for? ...
Accepted

### Using Daily or Annual Volatility to Price an Option

Always great if you can buy the option on a cheaper vol. The choice you're faced with after purchase is the frequency at which you hedge. The disparity between daily and annual vol indicates (as the ...
• 399
1 vote

### How does Bloomberg calculate Interest Rate Caps/Floors with Black Scholes Merton Model and Volatility set as "Normal"?

So, my question is how exactly does Bloomberg value the cap/floor, when we use model as "Black Scholes Merton" and Volatility as "Normal". Well, it doesn't. It will switch both ...
• 636
Accepted

### Is there a way to use normal volatility in the Black–Scholes–Merton model to value interest rate caps?

This has actually been done widely in the industry since negative interest rates became a long-term feature of financial markets (JPY, EUR, CHF). When your underlying is a Gaussian martingale, ...
• 2,510
Accepted

### Understanding volatility of volatility in realized roughness

kwinto's answer is correct. This paper [1] might be helpful in understanding the chain of reasoning (specifically equations (3) and (4) in the cited paper). Gatheral et al. observe the discrete ...

### Understanding volatility of volatility in realized roughness

Look at eq.(7), its RHS is an explicit expansion of what is defined in LHS of eq.(2) with $q=2$. Now, look at RHS of eq.(2), it defines $E[|Z|^2] \ l^{2H}$. So, $\nu = \sqrt{E[|Z|^2]}$ is the ...
• 176

### Is variance swap long volatility of volatility?

What about the following argument: a variance swap can be replicated with a portfolio of vanilla options, nearly all of which are out of the money (OTM) . But it is well known that OTM options are ...
• 15.2k

### Is variance swap long volatility of volatility?

Since the variance swap is linear in variance. Its local volatility exposure is 2σ, with second derivative = 2. If one was to hedge this local volatility exposure using options or a volatility swap, ...
• 399
Accepted

### Is variance swap long volatility of volatility?

My two cents: Let's agree that a derivative is long an underlying if the payoff of the derivative increases with the price of the underlying $S$. Then buying a variance swap is going long the ...
• 313
The delta neutral strike occurs when $N(d_1) = 0.5$, or when $d_1 = 0$. Now invert $$d_1 =\frac{\ln(S/K)+(r+\frac{1}{2}\sigma^2)T}{\sigma \sqrt{T}}$$ to solve for the strike $K$. You will have the ...