SERVING THE QUANTITATIVE FINANCE COMMUNITY

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by archishs2009
April 29th, 2008, 2:45 am
Forum: Student Forum
Topic: Implied Volatilty Calculation
Replies: 10
Views: 56771

Implied Volatilty Calculation

There are many softwares and excel add-ins available to calculate the implied volatility given the various parameters of B-S model. I guess they use the unitary or newton-raphson method to get those answers. In fact why dont you try goal seek in excel?
by archishs2009
April 28th, 2008, 9:28 am
Forum: Student Forum
Topic: Something's just not right...
Replies: 5
Views: 55856

Something's just not right...

So essentially, my assumption thatCurrent Price of 6-month option = Current price of 3 month option + Expected Price of a 3 month option after 3 monthsis right? You mean, its right as long as I am able to calculate the expected price to a fairly certain value?
by archishs2009
April 28th, 2008, 8:48 am
Forum: Student Forum
Topic: Something's just not right...
Replies: 5
Views: 55856

Something's just not right...

<t>QuoteOriginally posted by: outrunThe value "Expected price of a 3 month option after 3 months from now" will depend on the value of the future at that time. What value are you using?I am using Futures Value = Current value of 3 month future * e^(r*t)where r is (risk_free + Expected return from th...
by archishs2009
April 28th, 2008, 5:02 am
Forum: Student Forum
Topic: Something's just not right...
Replies: 5
Views: 55856

Something's just not right...

<t>While trying to price a long-term option recently introduced in NIFTY using rollover of futures for the index I came up with the following suggestion:First create a portfolio of a long-term option and the longest term future available for the underlying. For eg. I have a portfolio of a 6-month op...
by archishs2009
April 24th, 2008, 11:36 am
Forum: Student Forum
Topic: Cost of Roll
Replies: 3
Views: 55558

Cost of Roll

<t>Thanks.But then, how do I price a long-term option?Do I include this cost in Risk-free rate or dividend? Clearly BS model doesnt work. Is there a better model to price these options then? I studied Stochastic interest rate model but it doesnt seem to be satisfying this condition either. Please he...
by archishs2009
April 24th, 2008, 11:11 am
Forum: Student Forum
Topic: Cost of Roll
Replies: 3
Views: 55558

Cost of Roll

<t>Lets say I hedge a long term index option using a short term future on the index (as the long term future is not available). Then I incurr a cost of rolling the index every period. Is there a way that I can incorporate this cost i n pricing the long-term option? In fact if I use BS, do I need to ...
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