Finance Source: Quant.stackexchange.com

Classic dynamic delta-gamma hedging in Python

I am trying to run a delta-gamma hedge for a Black-Scholes model in Python.The Euler disceretizatioin of the paths is the simplest possible. I wrote the code below but the PnL looks undesirable and wrong. #install pandas import math import numpy as np import scipy as sp import numpy.random as npr import scipy.stats as scs import... go to Article >

Is Selling Options Still Worth The Risk?

140 Days ago Politics Source: Feedproxy.google.com

Is Selling Options Still Worth The Risk? Authored by Dominick Paolini and Patrick Hennessy via IPS Strategic Capital, I learned a long time ago as a young broker on Wall Street that when looking at a potential trade, if the numbers... read more

Predicting time series using Jump Diffusion model and Neural Networks

275 Days ago Finance Source: Quant.stackexchange.com

I am trying to understand the difference between using Jump diffusion model and Neural Networks or more precisely LSTM to predict time series data regardless what that data contains for example a stock price or withdrawals from ATMs. If I look... read more

Why does a Bermudan option have a higher implied volatility than its European counterpart?

0 Days ago Finance Source: Quant.stackexchange.com

I get that the premium for an earlier exercise should be higher to compensate the seller but intuitively you would think that the spot has "less room to run" in a potentially shorter period of time (due to a potential earlier exercise compared to... read more

1 Day ago Finance Source: Quant.stackexchange.com

I understand in Swaps there are two investing strategies called Outrights and Spreads. Could someone please confirm my understanding of them? I understand an Outright strategy in Swaps refers to investing in an ordinary Swap (i.e, fixed vs... read more

Duration of forward starting swap

0 Days ago Finance Source: Quant.stackexchange.com

For a spot starting interest rate swap, the modified duration is calculated as the modified duration of the fixed rate leg less the modified duration of the floating leg. Each of these calculations is akin to calculating the duration of a fixed... read more

Vol surface fitting with 5 degrees of freedom

0 Days ago Finance Source: Quant.stackexchange.com

For an options market making operation I need to be able to build a volatility surface, based on only 5 degrees of freedom, like e.g.: MaxPut, MaxCall, Skew, Curve and At The Money Vol. Is there an existing model or mathematical function, that... read more

How to gamma hedge and vega hedge an autocallable product?

0 Days ago Finance Source: Quant.stackexchange.com

I am pretty new in quantitative finance, and I am interested by the hedging of autocalls. Could you, please explain which financial products should be traded (specify the way, please) to delta hedge, gamma hedge and vega hedge an autocall? And... read more

Going from $\mathcal{P}$ to $\mathcal{Q}$

0 Days ago Finance Source: Quant.stackexchange.com

Under $\mathcal{P}$, we have the Heston Model given by: $$d S_{t}=\mu S_{t} d t+\sqrt{\nu_{t}} S_{t} d W_{t}^{S},\\ d \nu_{t}=\kappa\left(\theta-\nu_{t}\right) d t+\xi \sqrt{\nu_{t}} d W_{t}^{\nu}.$$ Assume I estimated these parameters... read more

Strict stationarity of GARCH(1,1) process

0 Days ago Finance Source: Quant.stackexchange.com

Consider the following GARCH(1,1) process: $$\epsilon_t = \sigma_t \eta_t \quad \text{where} \quad (\eta_t) \overset{iid}{\sim} \mathcal{N} (0,1)$$  \sigma_t^2 = \omega + \alpha \epsilon_{t-1}^2 + \beta \sigma_{t-1}^2 \quad \text{where} \quad... read more