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I recently came across an example ([Section 5.2.9 here][1]) which does a simple delta hedging experiment. Below are the details:
--------------------
**Market conditions**
Interest rates are at a 2% level --> r = 0.02
The underlying stock pays no dividend and follows a Geometric Brownian Motion (GBM) with ... |
New to Vol trading - wondering if there are any good references on calculating PnL from options strategies if I only have a volatility surface (delta or moneyness) and no individual options prices.
Also wondering is it possible to compute variance swap PnLs directly from implied volatility surfaces? Or do I need a ... |
I am reading this market making [paper](https://arxiv.org/pdf/1105.3115.pdf), and am trying to understand the transformation presented on page 6. A good resource for background relevant to the transformation is this other market-making [paper](https://www.math.nyu.edu/~avellane/HighFrequencyTrading.pdf). Could anyone p... |
**I know this is back to basics but I am perplexed by it!!!**
Assume that the future value (FV) of an investment at the end of year 1 is 112, the annual arithmetic expected return is 12%, hence the present value (PV) today is 100 since 112/(1.12)=100.
It is also evident that the monthly arithmetic average expec... |
Monthly and annual arithmetic mean in valuations? |
I have two very simple question about the implied volatility of a swaption and how it relates to actual rates level. Suppose we have two famous models, Bachelier and Black. Under either model, the swap rate $S(T)$ for a standard swaption with maturity $T$ and Brownian Motion $W(t)$ is given by for Bachelier $S(T) = S(t... |
If you have a moneyness surface, moneyness is usually defined the same way for calls and puts. I have seen in [another question from you](https://quant.stackexchange.com/q/59596/54838) that you use Bloomberg. On `OVDV`, moneyness is defined as K/S. Your screenshot from the linked question shows spot is 1814.79; since y... |
Look in any finance textbook or search about CAPM, it will say that CAPM is a model about how portfolios have systematic risk (risk that can't be diversified away) and idiosyncratic risk (risk that can be diversified away).
But it appears to me that this is impossible to justified based on CAPM, which is a model abo... |
The common interpretation that CAPM is about diversifiable and non-diversifiable risk cannot be justified by CAPM alone? |
Look in any finance textbook or search about CAPM, it will say that CAPM is a model about how portfolios have systematic risk (risk that can't be diversified away) and idiosyncratic risk (risk that can be diversified away).
But it appears to me that this is impossible to justified based on CAPM alone, which is a mod... |
Look in any finance textbook or search about CAPM, it will say that CAPM is a model about how portfolios have systematic risk (risk that can't be diversified away) and idiosyncratic risk (risk that can be diversified away).
But it appears to me that this is impossible to justified based on CAPM alone, which is a mod... |
Look in any finance textbook or search about CAPM, it will say that CAPM is a model about how portfolios have systematic risk (risk that can't be diversified away) and idiosyncratic risk (risk that can be diversified away).
But it appears to me that this is impossible to justified based on CAPM alone, which is a mod... |
The term "algo wheel" has been flying around for some time yet I have yet to find a consistent definition. It obviously has to do with making trading strategies more comparable, but where did the term first come up, what are different versions/solution providers and where is a good starting point? On top of it, has any... |
What is an algo wheel and where can I find references? |
In the SABR model, the parameter beta largely controls the back-bond behaviour of the model. How do people estimate beta?
One approach is to regress atm vol vs forward, i.e.
$$\ln(\textrm{atm vol}) = \ln(\alpha) - (1-\beta) \times \ln(\textrm{forward}).$$
which comes from the SABR model (expansion). Are any... |
I don't have any solid background in finance, but I have a strong mathematics and physics background.
I am reading *Algorithmic and high-frequency trading* from A.Cartea, S.Jaimungal and J.Penalva, CUP (2015).
In Sec.2.1.1 (page 21) the authors discuss the Grossman-Miller Market Making Model without any trading f... |
Consider an extension to the (one-dimensional) geometric Brownian motion model,
$$dS_t = \mu(t,S_.)S_t dt + \sigma(t, S_.)S_t dB_t,$$
where $\mu$ and $\sigma$ are previsible path functionals, i.e. they depend on the path, denoted by $S_.$ of the stock price, at least up to the current time $t$. Then consider the func... |
Unless I am missing the obvious, I do not see the question being answered? In my opinion trying to understand in simple language what $\alpha, \beta, \rho$ mean requires an explanation what these parameters do and why it is useful.
Here is my attempt:
Black (all Black Scholes formulas) assume(s) that Implied Vol... |
Unless I am missing the obvious, I do not see the question being answered? In my opinion trying to understand in simple language what $\alpha, \beta, \rho$ mean requires an explanation what these parameters do and why it is useful.
Here is my attempt:
Black (all Black Scholes formulas) assume(s) that Implied Vol... |
They only display a chart? No values? What is the platform?
If that is just a plot, I am inclined to say all they do is to run Black Scholes, shorten the time (if you go 6m into the future, just make the expiry 6m shorter), and reprice with a few different spot values. I don't think there is anything fancy. If it's... |
Unless I am missing the obvious, I do not see the question being answered? In my opinion trying to understand in simple language what $\alpha, \beta, \rho$ mean requires an explanation what these parameters do and why it is useful.
Here is my attempt:
Black (all Black Scholes formulas) assume(s) that Implied Vol... |
In my experience, $\beta$ is frequently pre-selected from [a priori considerations](https://quant.stackexchange.com/a/63749/54838) because there is a large degree of redundancy between $\beta$ and $\rho$ (both affect the vol smile in similar ways).
As for example shown on P.91 of the article [Managing Smile risk](h... |
Unless I am missing the obvious, I do not see the question being answered? In my opinion trying to understand in simple language what $\alpha, \beta, \rho$ mean requires an explanation what these parameters do and why it is useful.
Here is my attempt:
Black (all Black Scholes formulas) assume(s) that Implied Vol... |
Unless I am missing the obvious, I do not see the question being answered? In my opinion, trying to understand in simple language what $\alpha, \beta, \rho$ mean requires an explanation what these parameters do and why it is useful.
Here is my attempt:
Black (all Black Scholes formulas) assume(s) that Implied Vol... |
So I have the following formula for the Pricing of a Quanto Option (see image below).
While I understand this formula pretty well, I am not sure what is referred to as "domestic exchange rate" (can be seen in the two last lines of the picture).
Indeed, does domestic exchange rate mean domestic/foreign, or foreign... |
What is the meaning of Domestic Exchange Rate here? |
Most financial advisors recommend to inexperienced investors to put a large part of their investment in broad index funds (e.g. SPY). They will usually reiterate that most actively managed funds underperform their benchmarks, that most day traders lose money, etc., in other words that beating the market is exceptionall... |
Why do better-performing index funds not get a higher weight? |
Most financial advisors recommend to inexperienced investors to put a large part of their investment in broad index funds (e.g. SPY). They will usually reiterate that most actively managed funds underperform their benchmarks, that most day traders lose money, etc., in other words that beating the market is exceptionall... |
I found on pages 2 and 3 of Martin Haugh's "[Risk Measures, Risk Aggregation and Capital Allocation][1]" from 2010 an example showing non sub-additivity of VaR (excerpts given at the end).
I understood the example on the whole, but I would like to clear out this doubt: when we compute the quantile, why for portfolio... |
Unless I am missing the obvious, I do not see the question being answered? In my opinion, trying to understand in simple language what $\alpha, \beta, \rho$ mean requires an explanation what these parameters do and why it is useful.
Here is my attempt:
Black (all Black Scholes formulas) assume(s) that Implied Vol... |
I don't have any experience with Rust, but I would recommend watching these two videos to give you a sense of the speed required by HFT, and how it is delivered through C++. Maybe it would help you figure out how to deliver similar or better performance through Rust.
CppCon 2017: Carl Cook: [When a Microsecond Is an... |
I am currently calculating daily returns of a stock with the following formula:
Rt=Pt−Pt−1Pt−1(a)
However, once I have the data, I am unable to establish a range to classify the daily returns as a usual move or as an unusual move
Is there a statistical method to differentiate the days with unusual returns? I do ... |
I am currently calculating daily returns of a stock with the following formula:
<img src="https://latex.codecogs.com/svg.image?R_{t}=&space;\frac{P_{t}-&space;P_{t-1}}{P_{t-1}}" title="https://latex.codecogs.com/svg.image?R_{t}= \frac{P_{t}- P_{t-1}}{P_{t-1}}" />
However, once I have the data, I am unable to esta... |
This is a question better suited for [money stack exchange](https://money.stackexchange.com/).
In any case, [QQQ is the fifth largest ETF globally](https://www.statista.com/statistics/1181252/largest-etfs-market-cap-global/), not too bad for ~ 100 stocks.
Also, it seems there are a lot of discussions about w... |
I am currently calculating daily returns of a stock with the following formula:
$$R_t = \frac{P_t - P_{t-1}}{P_{t-1}}$$
However, once I have the data, I am unable to establish a range to classify the daily returns as a usual move or as an unusual move
Is there a statistical method to differentiate the days wit... |
I have been thinking about the notion of required return lately. I am not familiar with a formal definition, but I have tried to reason my way towards one. **Please let me know if my approach makes sense** and if it aligns itself with any mainstream finance theory. I would also appreciate a good reference on the subjec... |
You shouldn't shift your quotes more than 2 x your edge, if you fair mid hasn't changed.
Your initial mid was 22.5 and you made 20/25 then you made 2.5 edge when he lifted you at 25.
2 x your edge = 2 x 2.5 = 5
If you shift your quotes by 4, you'll make 24 / 29 and then even if he sells here you're onside. If... |
> What are some of the ways one can improve execution model of a market making strategy?
If your market making strategy is delta-neutral two-sided passive quoting, then your execution quality is really down to how quickly you update your prices when the market moves. Ideally you update your prices before the market ... |
When delta-neutral market making it is important to construct a mid price. Often the mid price of the asset you are trading is influenced by another (correlated) asset. What methodologies would you recommend to combine the returns of the leading asset into the mid price for the asset I am trading? Linear regression (va... |
What is the arbitrage opportunity and strategy here? |
Consider a GBM model with Heston volatility:
$$dS_t = \mu S_t dt + \sqrt{V_t} S_t dB_t^1$$
$$dV_t = \kappa(\theta-V_t)dt+\xi \sqrt{V_t}dB_t^2,$$
where $(B_t^1, B_t^2)$ is a correlated BM. Let
$$\mathscr{F}_t^S=\sigma(S_u : u\leq t),$$
and consider the filter estimate of the variance $V$
$$\hat{V}_t = \mathbb{E}(... |
Consider an extension to the (one-dimensional) geometric Brownian motion model,
$$dS_t = \mu(t,S_.)S_t dt + \sigma(t, S_.)S_t dB_t,$$
where $\mu$ and $\sigma$ are previsible path functionals, i.e. they depend on the path, denoted by $S_.$ of the stock price, at least up to the current time $t$. Then consider the func... |
I don't know of any Excel templates but the formulas are very easy to code up yourself.
There are the following sources (and I'm sure if you google-search more deeply, you'll even find more):
- https://www.realisedrate.com/ - from Natwest & ICE
- https://rfrcalculator.ihsmarkit.com/ - Markit's calculator, I th... |
In the paper by Beiglböck et al, I encountered the following description of the no-arbitrage framework (see screenshot below). What is the meaning of this coordinate process $S_i$? How does it relate to the usual postulation of The First Fundamental Theorem of Asset Pricing, i.e, that a discrete market on a discrete pr... |
I am struggling to reconcile the cashflow of a floating rate bond. I created a reference index of 5% flat, then a bond that pays quarterly coupon with Actual/360. For example, I'd expect the coupon on 4/15/2023 (accrual from 1/15-4/15) to be 90/360*5%*100 = 1.25 exactly. Maybe it needs to be converted from continuous t... |
A compound Poisson **random vector** $Y$ is well defined in [this][1] site in wikipidia.
Nothing prevents me from compound *strictly stationary* stochastic processes instead of compound random vectors. The definition is the same: let $X= (X_t)_{t\in \mathbb Z}$ be a strictly stationary stochastic processes, so $Y= ... |
Your definitions are unusual. Where did you find them?
There are period and cohort life tables (models) both refer to populations. A cohort model is a model where the cohort (i.e. year of birth) is an explanatory variable.
Including cohorts in mortality models makes a lot of sense since cohorts often carry pred... |
Your definitions are unusual. Where did you find them?
There are *period* and *cohort* life tables (models) - both refer to populations. A cohort model is a model where the cohort (i.e. year of birth) is an explanatory variable.
Including cohorts in mortality models makes a lot of sense since cohorts often carr... |
I've found an answer in a comment on [Lo (2002)][2] by [Mertens (2002)][1] that I can understand and have listed some additional steps below. The approach is slightly different to what I've listed in the original question but the results are exactly the same. The argument goes as follows: dropping Lo's assumption of no... |
I've found an answer in a comment on [Lo (2002)][2] by [Mertens (2002)][1] that I can understand and have listed some additional steps below. The approach is slightly different to what I've listed in the original question but the results are exactly the same. The argument goes as follows: dropping Lo's assumption of no... |
I've found an answer in a comment on [Lo (2002)][2] by [Mertens (2002)][1] that I can understand and have listed some additional steps below. The approach is slightly different to what I've listed in the original question but the results are exactly the same. The argument goes as follows: dropping Lo's assumption of no... |
I've found an answer in a comment on [Lo (2002)][2] by [Mertens (2002)][1] that I can understand and have listed some additional steps below. The approach is slightly different to what I've listed in the original question but the results are exactly the same. The argument goes as follows: dropping Lo's assumption of no... |
When making a high-frequency or mid-frequency prediction on an assets return, what are the advantages and disadvantages of making a continuous prediction vs a prediction that only fires on a particular event?
For example my model might have a number of features: order imbalance, trade imbalance etc
Do I want to m... |
im trying to implement the calibration algorithm presented in the following:
https://assets.ctfassets.net/lmz2w5z92b9u/2dxRCEEtmhqW8eEOo3VX0C/f8ad212fee0a96ffe9cce5b608fc130b/eSSVI_Implied_Volatility_WP_FY20.pdf
since eSSVI's parameter bounds are dependant on another one of the variables you are calibrating for, ... |
https://economics.stackexchange.com/questions/16115/what-is-the-equation-mathbbemr-1
The above post asks what $$\mathbb{E}[mR]=1$$ means and gets some great answers. From the first answer is seems that the physical rather than risk neutral probabilities are used to take the expectation.
I'm reading the paper "... |
What is the equation $\mathbb{E}[mR]=0$? |
I don't have the paper, I think you mean this [text](https://www.sciencedirect.com/science/article/abs/pii/S0304405X19301151?via%3Dihub).
On the Economics Stack Exchange $R$ denotes the asset return. In the linked paper, $r$ denotes the excess return, i.e. $R = 1 + r$. I believe all the rest is the same. |
I've found an answer in a comment on [Lo (2002)][2] by [Mertens (2002)][1] that I can understand and have listed some additional steps below. The approach is slightly different to what I've listed in the original question but the results are exactly the same. The argument goes as follows: dropping Lo's assumption of no... |
I don't have any experience with Rust, but I would recommend watching these two videos to give you a sense of the speed required by HFT, and how it is delivered through C++. Maybe it would help you figure out how to deliver similar or better performance through Rust.
CppCon 2017: Carl Cook: [When a Microsecond Is an... |
I don't have any experience with Rust, but I would recommend watching these two videos to give you a sense of the speed required by HFT, and how it is delivered through C++. Maybe it would help you figure out how to deliver similar or better performance through Rust.
CppCon 2017: Carl Cook: [When a Microsecond Is an... |
im trying to implement the calibration algorithm presented in the following:
https://assets.ctfassets.net/lmz2w5z92b9u/2dxRCEEtmhqW8eEOo3VX0C/f8ad212fee0a96ffe9cce5b608fc130b/eSSVI_Implied_Volatility_WP_FY20.pdf
the eSSVI model includes 2 variables that must be calibrated to option market iv data slice by slice (... |
im trying to implement the calibration algorithm presented in the following:
https://assets.ctfassets.net/lmz2w5z92b9u/2dxRCEEtmhqW8eEOo3VX0C/f8ad212fee0a96ffe9cce5b608fc130b/eSSVI_Implied_Volatility_WP_FY20.pdf
the eSSVI model includes 2 variables that must be calibrated to option market iv data slice by slice (... |
im trying to implement the calibration algorithm presented in the following:
https://assets.ctfassets.net/lmz2w5z92b9u/2dxRCEEtmhqW8eEOo3VX0C/f8ad212fee0a96ffe9cce5b608fc130b/eSSVI_Implied_Volatility_WP_FY20.pdf
the eSSVI model includes 2 variables that must be calibrated to option market iv data slice by slice (... |
I am required to prepare a portfolio containing 10 companies and analyse their returns over 10 years utilising the Fama-French 3 factor and Carhart 4 factor models. I chose the largest market cap companies from the DJIA in 2022 and obtained the following results for my 10-year sample (2012 - 2021):
|Variable|C... |
How do I interpret my Fama-French and Carhart factor coefficients? |
I'm tasked with the problem of setting up a cap/floor trading on an emerging market which doesn't have any interest rate derivatives traded yet besides plain vanilla interest rate swaps. We intend to sell these options to non-financial companies as an insurance against raising or falling rates, so only ask quotes are o... |
I am required to prepare a portfolio containing 10 companies and analyse their returns over 10 years utilising the Fama-French 3 factor and Carhart 4 factor models. I chose the largest market cap companies from the DJIA in 2022 and obtained the following results for my 10-year sample (2012 - 2021):
|Variable|C... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the questuon correctly, you don't intend to keep much vega / sensitivity to the poorly observable implied vol, unless in your view... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the questuon correctly, you don't intend to keep much vega / sensitivity to the poorly observable implied vol, unless in your view... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the questuon correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the questuon correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
When backtesting a trading strategy using Walk Forward Analysis/Optimization, I see people split each window into training and testing sets.
Suppose you want to select the best combination of MAs for your MACD strategy, you would first try the different combinations on your training set, select the best one, and rep... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
I am reviewing a fellow students paper, and it is argued in this paper that the Sharpe Ratio can differ based on which model is used to analyze the portfolio returns. Here a model based on the Arbitrage Pricing Theory which includes macroeconomic variables, and a classic CAPM model.
It is argued that the they calcul... |
Can there be different Sharpe Ratios for the same index? |
I was listening to a podcast and this guy mentioned the following (literally):
> The entire group is probably running 800 million at risk. So I'm going
> to say like call that like a, if you think of risk as the 1% tail risk
> you said may 250 million standard deviation, so it's probably
> somewhere around like a... |
Calculate fund size given risk limit? |
How could we calculate VaR for a futures contract or a option position? I know that a VaR is calculated by the return multiply the investment amount, but how could we calculate the investment amount of a future contract or options? Espeically for short position, the above formula become more confused.
Anyone give a ... |
Was debating if I should even comment on this but then thought [tonight I'm gonna have myself a real good time]( https://www.youtube.com/watch?v=HgzGwKwLmgM).
[JPMorgan Machine Learning in Financial Markets Conference, Paris 2019](http://rothko.com/wp-content/uploads/2020/01/Machine-Learning_Conference-2019.pdf) off... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
The appropriate technique is the optimal $\alpha$ damping of [Lord and Kahl](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=921336) (2007).
Since then, this technique has been refined by [Andersen and Lake](https://onlinelibrary.wiley.com/doi/abs/10.1002/wilm.10774) (2019).
The saddlepoint method is not prec... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
It could be worse. You're not asked to price rate exotics like accreters that might need more inputs besides implied vol cube :) and you're only asked to make markets. I.e., if I understand the question correctly, you don't intend to keep much rate vega / sensitivity to the poorly observable implied rate vol, unless in... |
I am trying to implement the calibration algorithm presented in the "[ESSVI Implied Volatility Surface](https://assets.ctfassets.net/lmz2w5z92b9u/2dxRCEEtmhqW8eEOo3VX0C/f8ad212fee0a96ffe9cce5b608fc130b/eSSVI_Implied_Volatility_WP_FY20.pdf)" white paper from Factset by Akhundzadeh et al.
The eSSVI model includes 2 va... |
I try to make a P&L explanation of a swap from the delta, gamma, to the N instruments of the rate curve (money market, futures and swap).
I use a perturbative shock of 1bp for each instrument of my rate curve used in the pricing:
[![enter image description here][1]][1]
the result I get is strongly degraded if I... |
P&L explain for swap? |
I am trying to implement the calibration algorithm presented in the "[ESSVI Implied Volatility Surface](https://assets.ctfassets.net/lmz2w5z92b9u/2dxRCEEtmhqW8eEOo3VX0C/f8ad212fee0a96ffe9cce5b608fc130b/eSSVI_Implied_Volatility_WP_FY20.pdf)" white paper from Factset by Akhundzadeh et al.
The eSSVI model includes 2 va... |
I don't have any experience with Rust. At a high enough level I believe the HFT community started using C++ because it was good at delivering close to metal performance with low (zero if you like) cost abstractions. Over the years, that's where the industry talent and existing code base has been. For another language t... |
I'm not sure what you mean by continuous prediction.
Depending upon you system design, you have some concept of state, "everything you need to know, and nothing else". For instance, if features of a few order books map to your system's concept of an state, only order book events require reevaluation of your predi... |
I have a strong background in finance and I know how to code, but I am lacking the statistical modelling part. I have started courses in mathematics and statistics. However, it is turning out very difficult to adapt that general knowledge to the actual in-use strategies.
So, I have thought about starting with papers... |
I have 2 discount factor curves;
DF 1
I expected every DF curve to have the shape of the 2nd one (almost a straight line), what does it mean economically when a DF curve has the shape of the 1st one? or maybe the curve is wrong?
[![DF 1][1]][1]
DF 2
[![df2][2]][2]
[1]: https://i.stack.imgur.com/cHKL... |
I have 2 discount factor curves;
DF 1
I expected every DF curve to have the shape of the 2nd one (almost a straight line), what does it mean economically when a DF curve has the shape of the 1st one? or maybe the curve is wrong?
How could a shorter CF 2036 offer a higher yield than the latter CF 2041
[![enter... |
The sigma i is the implied volatility you locked when u bought the call! It never moves. The only thing that move is sigma realised that you build during rebalancing… understood? |
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