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by tibbar
January 4th, 2018, 4:44 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

Sure but we don't know what it will cost in 3 months time. The question is what is: E_P( E_Q( max(S(t+0.25) - K,0) | F_{t+0.25}) | F_t) where t is current time, F are filtrations, Q is risk neutral measure, P is physical measure. My shortcut for a back of the envelope approximation to this was to as...
by tibbar
January 4th, 2018, 10:49 am
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

@tibbar,
If you haven't seen it, Risk and Return of Equity Index Collar Strategies looks useful. Just scanning it briefly, the conclusions sounded right to me.
Thanks will take a look
by tibbar
January 4th, 2018, 10:39 am
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

Are we back to Forward Starts then?! No this is an asset management risk management strategy where you want to protect against portfolio losses by buying a 3 month put option that protects against losses above (say) 10%. When the option expires a new 3 month put is purchased to replace the expired ...
by tibbar
January 3rd, 2018, 10:23 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

It would be a function of the stock price - e.g. 90% of stock price (it would actually be a collar to make the strategy self financing).
by tibbar
January 3rd, 2018, 9:55 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

What's the underlying?
SPX
by tibbar
January 3rd, 2018, 9:51 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

The background here is analysing the merits of hedging equity downside risk by rolling either short term options or longer tenors - e.g. comparing expected return and expected costs of a rolling 3 month hedging programme versus simply going for a 1 year tenor hedge. In comparing the price of a 1 yea...
by tibbar
January 3rd, 2018, 8:24 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

Thanks. My intuition is that the current option price but calculated using the forward volatility implied by the term structure of implied volatility would be a better approximation?
by tibbar
January 3rd, 2018, 6:13 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Re: Expected European option price

Thanks. This isn't a forward starting option since no premium is paid up front, it is about estimating the premium that is expected when the roll over rate comes for a hedging strategy where 3 month puts are rolled. Paul is correct on the approach. So i can simulate geometric Brownian motion for the...
by tibbar
January 3rd, 2018, 2:44 pm
Forum: Technical Forum
Topic: Expected European option price
Replies: 24
Views: 2527

Expected European option price

Hi, If I want to estimate the expected price of a vanilla call or put option with strike K, tenor 3 months, in three months time what's the recommended (practical) approach? If we assume stock price grows at expected rate x%, then a simple approximation might be to put the expected stock price in th...
by tibbar
December 9th, 2014, 7:35 am
Forum: Programming and Software Forum
Topic: FPGA
Replies: 5
Views: 4497

FPGA

FPGA
by tibbar
October 24th, 2012, 3:38 pm
Forum: Numerical Methods Forum
Topic: MCMC vs MLE
Replies: 31
Views: 198473

MCMC vs MLE

<t>Does anyone know if there is a choice of prior for which MCMC estimation will yield the same parameters as MLE? i.e. the median of the parameter distribution from MCMC being the same as the MLE point estimates.In practice they seem to be pretty close (with Jeffrey's prior), but don't know under w...
by tibbar
June 8th, 2012, 4:16 pm
Forum: Student Forum
Topic: CEV Model - Characteristic function
Replies: 5
Views: 13245

CEV Model - Characteristic function

<t>Thanks Alan. I was thinking of whether it is feasible to use the Fourier transform pricing approach from your paper on it. Looks like even if I find an expression for the characteristic function, it may be quite slow to evaluate. I'll perhaps come back to this at a later point, as it is an intere...
by tibbar
June 7th, 2012, 9:19 pm
Forum: The Quantitative Finance FAQs Project
Topic: Mathematica vs Matlab vs Maple, discuss
Replies: 81
Views: 225466

Mathematica vs Matlab vs Maple, discuss

Ah, well that's good news then - I was under the impression these were coming straight from Wolfram. Agreed on Mathematica - best system for prototyping.
by tibbar
June 7th, 2012, 8:28 pm
Forum: Student Forum
Topic: CEV Model - Characteristic function
Replies: 5
Views: 13245

CEV Model - Characteristic function

Hi,I'm trying to find the characteristic function for the CEV model - does anyone know where to find it? (tried google quite a bit...)Thanks!
by tibbar
June 5th, 2012, 10:28 pm
Forum: The Quantitative Finance FAQs Project
Topic: Mathematica vs Matlab vs Maple, discuss
Replies: 81
Views: 225466

Mathematica vs Matlab vs Maple, discuss

<r>Interesting, but then, have you ever looked at the Mathematica examples like <URL url="http://demonstrations.wolfram.com/OptionPricesInTheVarianceGammaModel/"><LINK_TEXT text="http://demonstrations.wolfram.com/Optio ... ammaModel/">http://demonstrations.wolfram.com/OptionPricesInTheVarianceGammaM...
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