It is pretty simple. Let's say there is no dividend. When you trade stock itself, even 3 months later you the stock ends with the same price as when you purchase, you are not breakeven, because you lose the time value of money. You could have earned some interest rate if you deposit the money in the...

Can any one recommend me any good papers talking about applying Machine Learning/Deep learning to predict volatility or prices?

Thanks very much

This is what Bloomberg does: For vanilla European option there is no point of using complicated models. Black/Normal model definitely is good enough. Of course there is no blocker of using more complicated models such as Hull-White or LMM models to price these vanilla instruments but since these mod...

It is okay to ignore this pull to par effect when you have a short option (<1y) written on a long term bond (around 10 year). For option on short term bond, neither BS or Black model can over come this effect. You will nee more sophisticated model e.g. Hull-White, BDT model

You can just fix the random variable (vector) for a scenario across all the securities/risk factors. Then you can use it to calculate Marginal VaR

Yes it does. fix-fix, flt-flt, fix-flt, all have fx exposure

Taleb says that one should be careful to avoid running overlapping data. Can someone please elaborate? The vol of vol controls the convexity of the implied volatility smile curve. So ideally it should come from the implied vol surface. If you don't have option smile data, using GARCH model to calcu...

Dear all,What are the Greeks for the currency FX forward? Assuming that the forward pricing model is F0 = S0 exp [(r_d - r_f)(T-t)].I have come up with my own stuff but would like to double check. Your formula is the forward price not the value of the forward. Your delta has to be on the value of t...

Why CDS and SWAP curves are usually used to price interest rate derivatives instead of other curves for example ZCB  curve or risk free curves? 1) you don't need CDS curve to price IR derivatives 2) Swap rates better reflects credit risk for OTC derivatives. Any curve can be expressed in the Par sp...

<t>QuoteOriginally posted by: ppauperQuoteOriginally posted by: FinatosQuoteOriginally posted by: AnalyticalVegaAll Cash buyout of the company AAA. The stock converts to cash and the volatility of cash is zero. So the two portfolios could be equal without any dividends in this one scenario.Nice thin...

<t>QuoteOriginally posted by: pcaspersQuoteOriginally posted by: FinatosI know, but since it is a put, this can be. Because put can have negative time value. That's why I say time can dominate volatility, even there is a little volatility in there. There should be a point where the time value of mon...

<t>QuoteOriginally posted by: ppauperQuoteOriginally posted by: FinatosQuoteOriginally posted by: AnalyticalVegaAll Cash buyout of the company AAA. The stock converts to cash and the volatility of cash is zero. So the two portfolios could be equal without any dividends in this one scenario.Nice thin...

<t>QuoteOriginally posted by: AnalyticalVegaAll Cash buyout of the company AAA. The stock converts to cash and the volatility of cash is zero. So the two portfolios could be equal without any dividends in this one scenario.Nice thinking, thanks for reply.Can we put it in another way,such as AAA pays...

<r>QuoteOriginally posted by: Traden4AlphaQuoteOriginally posted by: FinatosQuoteOriginally posted by: Traden4AlphaIf the dividend is very large (WRT volatility until expiry) then an ATM put would be worth zero. If the stock is at $100, vol is 5%/week, expiry in 1 week, and there's a dividend of $50...