Tag Info

When / how do I vol-scale portfolio weights when optimizing the portfolio?

You can try $$\min \frac{1}{2}w^T\Sigma w \quad \mathrm{s.t.} \quad w^T\mu=\mu_c$$ and subject to your other constraints. Then, trace out $\mu_c$ until the optimal solution reaches your target risk ...
• 5,763

Pricing FX options on pegged currencies

This is a good question. Within the space of pegged currencies the modeling and valuation approach varies. I can speak from trading the gulf ccys (USDSAR and USDAED specifically). These petrodollar ...
• 521

Pricing FX options on pegged currencies

I remember when people were trading a lot of FX options, as well as forwards on USDARS in 2001, before AR defaulted, and the currency peg broke. USDARS was pegged to 1, so there was no historical ...
• 9,574
1 vote

Why can't the curve find the least squares parameters when I used it in SABR model? (SABR Calibration)

f should be the forward rate. I have no idea where this line comes from? f = alp*np.exp((0.02 - q)*tau) It seems like that <...
• 1,060

Introductory material for getting started with local and stochastic volatility modelling

You may find A Short Note on Volatility Models an interesting summary providing bird's-eye overview of general ideas in volatility modeling. I would highly recommend SABR and SABR LIBOR Market Models ...
• 450