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by jonasre
July 20th, 2017, 10:23 pm
Forum: General Forum
Topic: Delta Hedging Volatility Breakeven
Replies: 4
Views: 1648

Re: Delta Hedging Volatility Breakeven

Wow thank you very much for your effort! First one technicality: Shouldn't dS^2 = S^2 * sigma^2 * dz [and not dt] - I guess what you did is assuming no drift rate? I am aware that this is a henn-egg problem. We are solving for something that we used as input. Still, this seems to be an at least &quo...
by jonasre
July 20th, 2017, 11:02 am
Forum: General Forum
Topic: Delta Hedging Volatility Breakeven
Replies: 4
Views: 1648

Re: Delta Hedging Volatility Breakeven

When I take the Black scholes equation and set Delta = 0 then i am left with -Theta + 0.5 * Gamma * S^2 * sigma^2 = 0 0.5 * Gamma * S^2 * sigma^2 = Theta 0.5 * S^2 * sigma^2  = Theta / Gamma S^2 * sigma^2 = 2 * Theta / Gamma Sqr(2Theta / Gamma) = S * sigma ...which is equal to  http://www.codeandfin...
by jonasre
July 16th, 2017, 1:32 pm
Forum: General Forum
Topic: Delta Hedging Volatility Breakeven
Replies: 4
Views: 1648

Delta Hedging Volatility Breakeven

Hello everybody, I am trying to derive the breakeven move for a delta hedged (Black Scholes) portfolio and refer to http://www.codeandfinance.com/option-break-even.html . I am wondering though what happens to the sigma squared from Ito's Lemma that is included (within the product that includes gamma...
by jonasre
July 24th, 2015, 2:46 pm
Forum: Student Forum
Topic: Books for systematically learning about the markets
Replies: 9
Views: 4015

Books for systematically learning about the markets

<t>I'd say the CFA Level I curriculum could be exactly what you are looking for. Try to get your hand on it, second hand should be quite cheap I'd say on ebay.Here's what's in it:Ethical and Professional Standards Exam Weight: 15%Quantitative Methods Exam Weight: 12%Economics Exam Weight: 10%Financi...
by jonasre
July 24th, 2015, 2:35 pm
Forum: Student Forum
Topic: Longer than 1-period-ahead Volatility Forecasting
Replies: 8
Views: 3247

Longer than 1-period-ahead Volatility Forecasting

<t>The GARCH(1,1) forecasts are computed using daily data. Although they are then (t+1) forecasts they can be "scaled up" into (t + 21) forecasts. There is no autocorrelation (and by the way beautiful normality, at least for some currency pairs) in the forecasts then.However, if I estimate an f = a ...
by jonasre
July 24th, 2015, 2:06 pm
Forum: Student Forum
Topic: Longer than 1-period-ahead Volatility Forecasting
Replies: 8
Views: 3247

Longer than 1-period-ahead Volatility Forecasting

OTC data, can't remember if I got it from Bloomberg or British Bankers Association.
by jonasre
July 24th, 2015, 2:00 pm
Forum: Student Forum
Topic: Longer than 1-period-ahead Volatility Forecasting
Replies: 8
Views: 3247

Longer than 1-period-ahead Volatility Forecasting

The maturity is one month, so they are in line with the forecast horizon.
by jonasre
July 24th, 2015, 1:52 pm
Forum: Student Forum
Topic: Longer than 1-period-ahead Volatility Forecasting
Replies: 8
Views: 3247

Longer than 1-period-ahead Volatility Forecasting

<t>Well, my problem is not that I don't know which variable to use as the independent one in the regression. I use B&S at the money implied volatilities (on the underlying) for that.My question was more how I should estimate the regression, because when I use daily observations for a 21 day fore...
by jonasre
July 24th, 2015, 11:01 am
Forum: Student Forum
Topic: Longer than 1-period-ahead Volatility Forecasting
Replies: 8
Views: 3247

Longer than 1-period-ahead Volatility Forecasting

<t>Hello everybody!I am currently trying to evaluate volatility forecasting models. I want to construct two models: one GARCH(1,1) model and one B&S at-the-money implied volatility model. I am in possession of daily data, looking like this (we are looking at some out-of-sample data here):The GAR...
by jonasre
June 24th, 2015, 12:05 pm
Forum: Student Forum
Topic: Model-Free Implied Volatility Calculation
Replies: 8
Views: 4326

Model-Free Implied Volatility Calculation

<t>@outrun: That really helped me! The nominator is actually becoming zero for for a large range of very low strike prices (as I round) as the time value is literally very very (d1 > 600) low.@Alan: Same for you.@acastaldo: I edited it.Thank you all for your help. I have now narrowed the intervals b...
by jonasre
June 23rd, 2015, 10:47 am
Forum: Student Forum
Topic: Model-Free Implied Volatility Calculation
Replies: 8
Views: 4326

Model-Free Implied Volatility Calculation

<t>Hello everybody!I am currently trying to calculate the MFIV, using the Jiang & Tian 2005 formula.Via Malz-Method I created a continuous set of option prices for equally spaced strike prices from 0 to 250 (current spot of my asset is 119).When I now apply the trapezium rule (Excel) to calculat...