Thanks Gents, I agree with you - ATM vols are the same given put call parity. The story becomes different when moving to the wings. Short a 90 delta call and long a 10 delta put implies a smirk would be bounded with put call parity. Appreciate your help.FH

<t>Does vanilla put call parity imply smirks are bounded on the implied volatility surface?When testing extreme moves in a smirked surface, parity appears to break down, creating arbitrage potential until reverting to this 'implied bound'. I havn't been able to find any specific literature on this. ...

Thanks Aaron

I learnt PCA with the textbook by Johnson, D.E. (1998) "Applied Multivariate Methods for Data Analysis". It devots a chapter to this topic, however without a finance focus. Another textbook is Alexander, C. (ISBN 0-471-89975-5) that devotes a chapter example to finance.

shital, the best advice for you here is to read J. Hull options textbook, this will take you through this very simple calculation and you'll probably learn a thing or two.

<t>Given a time series (of a thinly traded futures market) fails the JB test miserably, can one take an alternative distibution? Or is the JB test too tight in an empirical framwork, and if so how much kurtosis is deemed to be acceptable?The aim is to examine the return distribution for the roll and...

<t>Merton (1980) illustrates, in his paper "On Estimating the Expected Return on the Market", the estimates of variance and covariance from time series data is more accurate than the corresponding expected returns. If you consider the drift coefficient of the lognormal model within a 'Black Scholes'...

<t>QuoteOriginally posted by: EtukaIf you value the opinion of your supervisor, you should discuss the pros and cons of studying in the States openly. Your supervisor should not think less of you for it and you will have a better idea of how your options compare.If you carry any clout with the Austr...

<t>Derivatives Pricing: The classic collection. 2005. (RISK Books)This book contains all the classics contributing to derivative pricing and contains Bacheliers paper. It also has a few 'hidden gems' that are often referred to but have never been published. Peter Carr initiated this book becuase of ...

<t>Thanks from Australia. Here a PhD is 3 years research, alike the European system. I understand north America have a 5 yr PhD program with 2 years coursework. I recently discussed courses with a former Yale professor, who recommended finding a institution in the US due to the quality and superior ...

In my country the solution is very simple - we would beat the living shit out of the goblin. Survival of the fittest my friend.

<t>I would have to agree with spursfan - Joshi, Neftci, and Rennie and Baxter will provide a good rounded introduction to stochastic calculus. Plus you get the benefit of posting MJ any particular question on his text, and previous posts have attached a comprehensive answer guide to those exercises ...

<t>I'm a recent (first class) honours graduate of quantitative finance. I had the great privilege to work under a well recognised author who is presently associating with a Nobel laureate regarding a recently developed financial market theory. Whilst offered a PhD scholarship I fear my abilities req...

<t>Lets say (No - Ne) represents the number of post offer shares outstanding andPe = (PoNo - PtNe)/(No - Ne) Then the post offer price, Pe, is the value of the firm less repurchase cost, (PoNo - PtNe), normalised. The scaling factor is simply the percentage of shares purchased given the post offer n...