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How to calculate the spot variance from the TSRV (Two-Scale Realized variance)

Determining $n$ in your simulation procedure: $n$ is the amount of intraday data between two days $[t-1, t]$. If we assume a 1-second frequency during NYSE time opening hours, we have $n = 60 \cdot 60 ...
Pleb's user avatar
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How do options traders capture volatility?

It sounds like you believe volatility will be higher than is currently priced in the markets. In your first example of buying a straddle, you are long vega and long gamma. In other words, you are ...
AlRacoon's user avatar
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2 votes

Forward Rate Volatility Calculation - Caps

What you are asking for is called volatility stripping. A cap is a series of consecutive caplets which are call options on forward rates. Caplets are not traded individually on the market so there are ...
Hasek's user avatar
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1 vote
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Standard deviation of large equal-weighted portfolios

This is incorrect at the step where you evaluate the double summation: $Var(R_P)=\sum_{i=1}^n\sum_{j=1}^n\frac{1}{n^2} Cov(R_i,R_j)$ You then have to consider two cases $i=j$ and $i \neq j$. For $i=j$,...
Hans-Peter Schrei's user avatar
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Deriving eq. 5 in Carr & Madan 1998

Your problem is in the $A$ term. Using your notation, you should have $$ d h(t, F_t) = \dfrac{\partial h}{\partial t} dt + \dfrac{\partial h}{\partial F_t} dF_t + \dfrac{1}{2} \dfrac{\partial^2 h}{\...
KT8's user avatar
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