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Search found 14 matches

by travisf
February 20th, 2018, 8:56 pm
Forum: Technical Forum
Topic: FX barrier options
Replies: 5
Views: 2537

Re: FX barrier options

Does anyone recall the standard way of pricing barrier options ? The way the street does it, as opposed theory Wow this sat for a long time without an on-point reply.  I would say the introductory paragraphs of Austing and Li's recent paper on model-independent barrier pricing accurately describe w...
by travisf
February 14th, 2018, 12:18 pm
Forum: Technical Forum
Topic: Conditional Strike Option
Replies: 7
Views: 2087

Re: Conditional Strike Option

It sounds like this is a two leg option: a 1.5 strike call together with a 1.35 strike put with a knockin barrier at 1.25.  
by travisf
December 15th, 2017, 7:55 pm
Forum: Trading Forum
Topic: End of bitcoin?
Replies: 917
Views: 199572

Re: End of bitcoin?

Methinks that when the crash comes there will be chaos in which buyers during the crash will be unable to revoke regretted purchases and will be forced to wait up to 3 days before they can attempt to get out. There are about 21 million active bitcoin wallets.  [1] The bitcoin blockchain supports ab...
by travisf
April 4th, 2017, 12:57 pm
Forum: Student Forum
Topic: First passage probability in american put option pricing
Replies: 4
Views: 1337

Re: First passage probability in american put option pricing

Maybe: maybe you are thinking $S_c$ is a number?  It is a curve. From that paper, "The maximization is taken over all possible functions $S_c(\tau)$, where $\tau \equiv T-t$."  For the limit Alan is testing, the curve $S_c(\tau)$ is approximately zero for $\tau > 0$ but goes to the strike ...
by travisf
March 9th, 2017, 5:35 pm
Forum: Student Forum
Topic: Heston delta closed form?
Replies: 14
Views: 2451

Re: Heston delta closed form?

frolloos : nice!  It took me a minute to see how it works, but it is even more general than the trick I gave. Thanks!
by travisf
March 8th, 2017, 4:35 pm
Forum: Student Forum
Topic: Heston delta closed form?
Replies: 14
Views: 2451

Re: Heston delta closed form?

A call option gives the holder the right to exercise at maturity.  They could choose to exercise when spot is above a level X not necessarily equal to the strike K.  We know that X = K is the optimal exercise level giving maximum call value, so dCall/dX = 0 at X=K.  So write :     Call(S) = C(S1,S2,...
by travisf
February 22nd, 2017, 8:50 pm
Forum: General Forum
Topic: How does P&L of delta-hedged option position accumulate over time?
Replies: 43
Views: 5752

Re: How does P&L of delta-hedged option position accumulate over time?

Paul : is it only VANILLA options you can buy?  If you have access to anything with negative vega, like an in-the-money binary option for instance, you can buy that cheaply and delta hedge at the real vol for a guaranteed profit.
by travisf
November 16th, 2016, 7:29 pm
Forum: Technical Forum
Topic: Spot shock for Heston
Replies: 7
Views: 1734

Re: Spot shock for Heston

Re: Paul's suggestion, see the recent work of Hull and White on the optimal in-practice delta hedge ratio.  https://papers.ssrn.com/sol3/papers.cfm ... id=2658343
by travisf
August 1st, 2016, 6:21 pm
Forum: Technical Forum
Topic: The fundamental transform
Replies: 8
Views: 1636

Re: The fundamental transform

Alan -- In FX at least, the market will always use the put-call-parity preserving option in the case of a martingale defect.  This is because in FX participants will very much insist that the pricing agree regardless of which currency is taken as numeraire.  The way to make it symmetrical is to take...
by travisf
March 2nd, 2016, 3:54 pm
Forum: Technical Forum
Topic: power numeraire
Replies: 2
Views: 2354

power numeraire

<t>If you've looked at a pricing formula by Alex Lipton, he almost always uses square-root-of-spot as the numeraire. That symmetrizes between the original numeraire and taking the asset as numeraire. Of course he doesn't write it that way : he moves to PDE space and does changes of coordinates there...
by travisf
May 15th, 2015, 8:08 pm
Forum: Economics Forum
Topic: long run stability requires a deficit
Replies: 8
Views: 9138

long run stability requires a deficit

<t>QuoteOriginally posted by: Traden4Alpha(1) The planet can be finite but the economy can be unbounded. I have trouble with that. So you get to a steady population consuming a steady amount of food and energy, but creating ever-nicer products to sell to one-another. In broad category (food, enterta...
by travisf
May 15th, 2015, 5:51 pm
Forum: Economics Forum
Topic: long run stability requires a deficit
Replies: 8
Views: 9138

long run stability requires a deficit

<t>QuoteOriginally posted by: crmorcomIf you assume that, it sounds like you are entirely assuming your main assertion, which is perhaps not what you want.I am saying something very simple, so it isn't very far from assuming the main assertion. I do mean to assume that "steady state" means that ther...
by travisf
May 14th, 2015, 7:59 pm
Forum: Economics Forum
Topic: long run stability requires a deficit
Replies: 8
Views: 9138

long run stability requires a deficit

<t>In a steady state world, by assumption money supply grows at the same rate as debt grows, so they are proportional. That is the easy answer. In our non-steady current state, it is harder and not exactly true. But still government debt is the hard core of safe assets, and underpins the money suppl...
by travisf
May 14th, 2015, 7:33 pm
Forum: Economics Forum
Topic: long run stability requires a deficit
Replies: 8
Views: 9138

long run stability requires a deficit

<t>Most everyone seems to assume that in the long run a balanced budget is required. I think that is wrong. Probably I am being silly; I am a quant, not an economist. There are some smart people here who surely know more than me. Please mercilessly destroy my naivety. Key Assumptions :(1) Steady sta...