May be I was not clear. I see the difference in margined option vs OTC option as the same as margined forward (future) vs OTC forward. If margined forward has different delta than OTC forward, then this logic should apply for options, right?

well, the delta of a forward is not equal to delta of a future, so we need to define what derivative we are talking about.

If your option and underlying both exchange traded products then delta=1. If option is OTC, the delta=90%

volatilities are nothing. what is problem- correlation. there is severe correlation smile. You can estimate volatilities from past data. Correlation- is different matter. The only way to estimate it is to run historical analysis of hedging given option, and then you will be wrong

<t>Spread options is the worst one- there are no implied correlations and you have all the problems with correlation smiles- i.e. summer never goes above winter (Europe).Spot based is ok, but still you have to be careful to calibrate to spot volatilities/mean reversion- i.e. gas curve does not behav...

<t>Energy companies are not bad at all. Everything depends on what you want. Depending on the shop they can be sofisticated (BP, RWE), in the middle (EDF), low end (Shell) trading. But they all tend to optimize real options- plants, interconnectors (aka spread options), storages, swing, etc... Stora...

You are inventing a weel, alexandreC. The majority of questions (like 80%) I got for quant positions are well documented and you can buy the set for under 30 pounds from Amazon. Anyway, this question is in the rest 20%, probably there should be "errata" section published soon...

Yes, this is a pretty standard question for this bank... I first heard it around 2 years ago

Probably everybody knows simple probability exercise: if it is 50% probability that it rains on Saturday and 30% on Sunday what is the probability of the rain.... But what is the answer if we also given a correlation between the outcomes of rain, rho in [-1,1]....

Kirk should do the trick. All you left with is computing implied variances from volatility smiles on both assets

<t>QuoteOriginally posted by: wondering But it won't change the sign of the results(still positiv gain), right?No, do not think this is the correct statement. Just tried to do hedging strategy on a constantly rising underlying- you loose. Also about smiles- in equities you have a smile due to the pu...

<t>The reason is that you are trying to look at real life options with Ideal Geometric Brown. mothion. Yes, in GBM you would loose money, but no underlying behaves like one. It may be well mean-reversion model (like commodities), or just non GBM motion. Then, in GBM you consider inplied volatility a...

Hi, I know there is smiling tree by Barle, Cakici (aka Derman-Kani) for one underlying. Can it be extended to smile 3-d tree with two correlated assets? Anybody did construct this tree?

You never ever price options wit historical volatility- does not matter whether it is a 1 month or 6 months. This is the same as sell a house in 1 year time using linear approximation from last year data.

<t>QuoteOriginally posted by: CarolynTQuoteOriginally posted by: quantstudent19Phd grads enter as associate while MS grads usually enter as analysts / 3rd year analyst, and BS grads always as analysts.Hence the salary difference in the first few years.Once they're all VPs, the best one has the best ...