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by riskneutralprob
December 28th, 2023, 12:02 pm
Forum: General Forum
Topic: Re-pricing a Call | Taylor Series
Replies: 13
Views: 4333

Re: Re-pricing a Call | Taylor Series

what about Delta Decay (ie d_Delta / dt ).   Seems like your average is combining the shock in time and the shock in underlying level.   Maybe should be expressed as a regrouping of a subset of the Taylor terms?
by riskneutralprob
November 2nd, 2023, 3:09 am
Forum: Technical Forum
Topic: Hessian Estimation NOT only for Minimization Problems
Replies: 24
Views: 4382

Re: Hessian Estimation NOT only for Minimization Problems

The function evaluation takes a while to compute.  I have the gradients calculated via central differences once per day.     I can even calculate the diagonal of the hessian via the function evals I have from calculating the central difference gradient.   calculating the off-diagonals of the Hessian...
by riskneutralprob
November 1st, 2023, 11:40 pm
Forum: Technical Forum
Topic: Hessian Estimation NOT only for Minimization Problems
Replies: 24
Views: 4382

Hessian Estimation NOT only for Minimization Problems

Looking to explore techniques for estimating the Hessian from a series of gradient-vectors and a series of x-vectors.    I have looked at the BFGS method, but that pushes the Hessian to be positive definite.   I also looked at the SR1 method so I can get both positive definite and negative definite ...
by riskneutralprob
August 22nd, 2023, 4:20 am
Forum: General Forum
Topic: When Issued Bonds (Pre-Auction Pricing)
Replies: 2
Views: 3878

Re: When Issued Bonds (Pre-Auction Pricing)

Aren't they just issued at par on auction date and the WI period trades are just indications for the coupon?    I'm ignoring re-issues and re-openings.  
by riskneutralprob
February 4th, 2021, 5:58 am
Forum: General Forum
Topic: Why is there prepayment risk for a TBA?
Replies: 5
Views: 7126

Re: Why is there prepayment risk for a TBA?

Maybe a real example would help UMBS 30Yr March 2.5 TBA    Pool = a basket of individual mortgages.  It is tradable, but less liquid than a TBA. UMBS =  Fannie Pools and Freddie Pools with payment delays equal to Fannie Pools  (UMBS cutover was in Jun-2019) March = Delivery Date where you need to de...
by riskneutralprob
October 19th, 2020, 2:08 pm
Forum: General Forum
Topic: sigma root (T-t)
Replies: 86
Views: 14880

Re: sigma root (T-t)

I don't post a ton, but I believe this is a waste of most of these guys' time.  You require too much prerequisite information.  This should really be moved to the 'Student Forum' where it will be appropriately ignored as it has been covered by many texts already.    For stock options, start with a B...
by riskneutralprob
January 8th, 2019, 2:00 pm
Forum: General Forum
Topic: Fixing offset in AUD swaps
Replies: 7
Views: 1938

Re: Fixing offset in AUD swaps

I looked again on bloomberg and in the description of the AUD 5Y Swap, it actually says the Fixing Lag on the Float Leg is 2 business days.  Sorry I tried to post the screenshot but it failed to post.
by riskneutralprob
January 8th, 2019, 1:57 pm
Forum: General Forum
Topic: Fixing offset in AUD swaps
Replies: 7
Views: 1938

Re: Fixing offset in AUD swaps

[img]file://.d:/temp/audswap5y_2fltleg.gif[/img][img]file:///d:/temp/audswap5y_1.gif[/img]
by riskneutralprob
January 7th, 2019, 7:49 pm
Forum: General Forum
Topic: Fixing offset in AUD swaps
Replies: 7
Views: 1938

Re: Fixing offset in AUD swaps

I think it used to be a 1 day rate fixing lag when the reference rate was LIBOR.  I think they switched to BBSW with a 0 day rate fixing lag.
by riskneutralprob
September 17th, 2018, 9:48 pm
Forum: General Forum
Topic: Cost of Carry options on futures CME on Margin account
Replies: 5
Views: 1990

Re: Cost of Carry options on futures CME on Margin account

What is the bid/ask of the call?  What is the bid/ask of the put?  What is the bid/ask of the future?
by riskneutralprob
April 19th, 2018, 5:21 pm
Forum: General Forum
Topic: Normal Distribution Option Model
Replies: 14
Views: 3126

Re: Normal Distribution Option Model

Try:
https://www.math.nyu.edu/~iwasawa/normal.pdf

To make things simpler, I would replace  (1/sqrt(2*PI)) * exp(-(d1^2/2)) with N'(d1)
where N' is the PDF of the standard normal distribution.
by riskneutralprob
April 19th, 2018, 4:35 pm
Forum: General Forum
Topic: volatility and options payoff..a doubt
Replies: 5
Views: 1576

Re: volatility and options payoff..a doubt

In a non-mathy way: OptionValue = FwdValue + VolValue If you "freeze" all parameters except vol:  If Vol goes up, then VolValue goes up  ==> if you freeze FwdValue, then OptionValue ALWAYS goes up If Vol goes dn, then VolValue goes dn ==> if you freeze FwdValue, then OptionValue ALWAYS goe...
by riskneutralprob
March 19th, 2018, 3:02 pm
Forum: General Forum
Topic: Normal Distribution Option Model
Replies: 14
Views: 3126

Re: Normal Distribution Option Model

Maybe it would help if you think of Put-Call Parity as:

(F-K) = (C-P)*exp^(rt)

This way when you add things like dividend yields, or foreign/domestic interest rates, it would still work because it would be embedded in the F
by riskneutralprob
November 27th, 2017, 3:59 pm
Forum: Trading Forum
Topic: Risky Corporate Bond Settlement Scenario
Replies: 5
Views: 5723

Re: Risky Corporate Bond Settlement Scenario

So I include the possibility of the event occurring between trade and settle?  When adjusting the dirty price to settle price for a risky corporate bond, should I simply use risk free discounting?   If I adjust the survivals, I am conditioning on the event not occurring before settle date.   So, my ...
by riskneutralprob
November 22nd, 2017, 7:47 pm
Forum: Trading Forum
Topic: Risky Corporate Bond Settlement Scenario
Replies: 5
Views: 5723

Risky Corporate Bond Settlement Scenario

The settlement days convention for US Corporate Bonds is T+3.    So there are 2 dates:    t_value    t_settle  ( This is 3 business days after t_value ) Let's say you buy a corporate bond on t_value and the company defaults on day T+2,  what happens in general?  Same as normal? Also, what about thin...