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by emac
February 21st, 2017, 6:19 pm
Forum: General Forum
Topic: How does P&L of delta-hedged option position accumulate over time?
Replies: 43
Views: 3902

Re: How does P&L of delta-hedged option position accumulate over time?

Well I wrote that you could only buy options and implied vols were 10 points above realised at each point in time. So is it possible to make money? Oh, my bad! I would say Delta hedging will accumulate loss every time. I have no idea how to make money if I'm forced to buy expensive option and delta...
by emac
April 22nd, 2016, 1:36 pm
Forum: Careers Forum
Topic: Electronic trading
Replies: 3
Views: 2215

Electronic trading

<t>QuoteOriginally posted by: mtsmBe careful with electronic trading in banks.Some people claim that banks will rely on third party systems to provide services. It's getting progressively more difficult for banks to be competitive in businesses relying on niche technologies like etrading.Not sure I ...
by emac
April 22nd, 2016, 6:37 am
Forum: Careers Forum
Topic: Electronic trading
Replies: 3
Views: 2215

Electronic trading

<t>Hi, some questions about electronic trading (by which I mean algorithmic execution and market making teams in banks or places like XTX, Citadel, etc.)1. Which are the best places? (I get the impression that Citi & Deutsche are particularly good among the banks and XTX is excellent.) 2 How eas...
by emac
December 5th, 2015, 1:01 pm
Forum: Student Forum
Topic: self-financing for the clueless
Replies: 11
Views: 3057

self-financing for the clueless

Ok, yes. But usually the hedging argument is used to derive the B-S PDE.
by emac
December 5th, 2015, 10:18 am
Forum: Student Forum
Topic: self-financing for the clueless
Replies: 11
Views: 3057

self-financing for the clueless

<t>QuoteOriginally posted by: frolloosQuoteOriginally posted by: emacYou cannot show that the other terms vanish. I think most people agree that the argument you are trying to make is incorrect.That is what peter carr is saying when he says we don't want to calculate the total derivative of the port...
by emac
December 4th, 2015, 6:04 pm
Forum: Student Forum
Topic: self-financing for the clueless
Replies: 11
Views: 3057

self-financing for the clueless

<t>You cannot show that the other terms vanish. I think most people agree that the argument you are trying to make is incorrect.That is what peter carr is saying when he says we don't want to calculate the total derivative of the portfolio value process, V. Instead, he says you should calculate what...
by emac
December 4th, 2015, 9:50 am
Forum: Student Forum
Topic: self-financing for the clueless
Replies: 11
Views: 3057

self-financing for the clueless

Maybe you could explain your question a bit better then? To me: dx(B + dB) + dy(S+dS) = 0 doesn't make sense Edit: do you mean: "when we apply Ito's formula to V, why do the other terms need to vanish?"
by emac
July 2nd, 2015, 12:01 pm
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

<t>What is the spurious input?The standard error is usually quoted as a root mean square error, i.e.[$]\sqrt{E |X_M - \mu|^2} \leq \frac{std(X)}{\sqrt{M}}[$]But this is an average error. For a given realisation of [$]X_M[$] you don't know a priori how close to [$]\mu[$] it actually is, you only know...
by emac
July 1st, 2015, 1:50 pm
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

<r>QuoteOriginally posted by: CuchulainnThat looks nice. We had dv = -1/2 sig^2 dt + sig dW before where ad-hoc guess for M was used.<URL url="http://www.wilmott.com/messageview.cfm?catid=8&threadid=55676&FTVAR_MSGDBTABLE=In"><LINK_TEXT text="http://www.wilmott.com/messageview.cfm? ... DBTAB...
by emac
July 1st, 2015, 1:24 pm
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

<t>QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: emacQuoteOriginally posted by: CuchulainnQuoteOriginally posted by: emacQuoteOriginally posted by: mutleyI might be misreading you but doesn't that require you to know the variance of the payoff i.e. we want to know the price of the ...
by emac
July 1st, 2015, 10:49 am
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

<t>QuoteOriginally posted by: CuchulainnQuoteOriginally posted by: emacQuoteOriginally posted by: mutleyI might be misreading you but doesn't that require you to know the variance of the payoff i.e. we want to know the price of the derivative has converged and you are telling me that M is a function...
by emac
July 1st, 2015, 8:29 am
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

<t>QuoteOriginally posted by: mutleyI might be misreading you but doesn't that require you to know the variance of the payoff i.e. we want to know the price of the derivative has converged and you are telling me that M is a function of Var(X) - X being the price of the derivative on a given sample?Y...
by emac
June 30th, 2015, 8:29 am
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

<t>QuoteOriginally posted by: CuchulainnWe've been through this before in an earlier thread. How do you get (deterministic) penny accuracy with MC? You can't IMO.Let [$]X_M[$] be the standard monte carlo estimator of the mean [$]\mu[$] of a random variable [$]X[$], with [$]M[$] samples . Pick an acc...
by emac
June 24th, 2015, 9:21 am
Forum: Numerical Methods Forum
Topic: Finite difference and control variates
Replies: 47
Views: 7721

Finite difference and control variates

QuoteOriginally posted by: Cuchulainn MC lacks the concept of pointwise convergence, so it's like mixing oil with water.Ummmm ... a standard Monte Carlo approximation converges almost surely. In what sense does it lack a concept of pointwise convergence.
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