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January 18th, 2016, 12:00 am
Forum: Technical Forum
Topic: Is there any industrial standard method to hedge option while need to roll future?
Replies: 4
Views: 2108

### Is there any industrial standard method to hedge option while need to roll future?

The option is settled by cash, depending on the spot rate of dec future, say on its price of 15th , Sep.
January 15th, 2016, 8:30 am
Forum: Technical Forum
Topic: Is there any industrial standard method to hedge option while need to roll future?
Replies: 4
Views: 2108

### Is there any industrial standard method to hedge option while need to roll future?

<t>Thank you daveangel.I think that this can be cured by pricing with carrying cost theoretically. However, it seems that there is still an accounting issue. Say, we have sold a call option expiring on Sep and hedging it with June future. Suppose we hedged the option perfectly until May. On someday ...
January 14th, 2016, 2:50 am
Forum: Technical Forum
Topic: Is there any industrial standard method to hedge option while need to roll future?
Replies: 4
Views: 2108

### Is there any industrial standard method to hedge option while need to roll future?

<t>Suppose I sell a call option expiring on September on March. Active future contracts are on June and October. So I need to long June contract since March, then near the end of May, I need to switch to October contract. Usually at the end of May, October contract is 1-2% higher than the June contr...
December 22nd, 2015, 9:21 am
Forum: Student Forum
Topic: Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio
Replies: 10
Views: 2731

### Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio

Thank you daveangel.Most people are directly using that formula on Hull's book for a long time. It is difficult to make a correction now.
December 22nd, 2015, 8:25 am
Forum: Student Forum
Topic: Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio
Replies: 10
Views: 2731

### Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio

<r>Thank you daveangel. I thank your results are correct and I have no problem in calcuating h.However, after obtaining h, how to calculate the number of foward contract N one needs to hold?My result is N = h*QA*S/(QF*F)but John Hull's book suggestsN = h*QA/(QF)Where QA is Size of position being hed...
December 22nd, 2015, 7:42 am
Forum: Student Forum
Topic: Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio
Replies: 10
Views: 2731

### Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio

<r>Thank you daveangel. I agree with you. But the John Hull's book uses asset size amount.<URL url="http://financetrain.com/minimum-variance-hedge-ratio/In">http://financetrain.com/minimum-variance-hedge-ratio/In</URL> your example, I think F and S should be future and spot price. But these two pric...
December 22nd, 2015, 12:13 am
Forum: Student Forum
Topic: Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio
Replies: 10
Views: 2731

### Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio

Thank you. But h is a weighting of what? money amount or asset unit?
December 21st, 2015, 5:14 am
Forum: Student Forum
Topic: Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio
Replies: 10
Views: 2731

### Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio

I think there is some doubt here. Does hedge ratio here means money amount ratio or unit amount ratio?
December 21st, 2015, 4:58 am
Forum: Student Forum
Topic: Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio
Replies: 10
Views: 2731

### Some confusion on John Hull?s method to calculate Minimum Variance Hedge Ratio

<r>Suppose the spot price is S, forward price is F. S and F are the prices of two correlated asset. John Hull?s book directly gives a method to calculate Minimum Variance Hedge Ratio <URL url="http://financetrain.com/minimum-variance-hedge-ratio/as">http://financetrain.com/minimum-variance-hedge-rat...
December 17th, 2015, 8:55 am
Topic: How to pick up Vector Autoregression Factor? Return or Price?
Replies: 2
Views: 2849

### How to pick up Vector Autoregression Factor? Return or Price?

OK. Thank you. I think I have to try to make it.
December 17th, 2015, 8:54 am
Forum: Technical Forum
Topic: Does mixed-frequency Vector Autoregression help to improve forecasting performance?
Replies: 0
Views: 1783

### Does mixed-frequency Vector Autoregression help to improve forecasting performance?

<t>I am now using VAR to forecast asset return. I am trying to combine daily asset data with monthly or weekly macroeconomic data in order to improve the forecasting performance of my model. I indeed find some literature on mixed-frequency VAR. Typically the research work by Eric Ghysels. However, I...
December 11th, 2015, 8:17 am
Topic: How to pick up Vector Autoregression Factor? Return or Price?
Replies: 2
Views: 2849

### How to pick up Vector Autoregression Factor? Return or Price?

<t>I am making a VAR model to forcast future price. The factors include other commodity price, interest rate, FX rate, commodity storage and so on.I find most literature uses asset return as VAR input factors, but my back test result shows that if I directly use prices as input, the result looks muc...
September 21st, 2015, 10:47 am
Forum: Careers Forum
Topic: Does any professor in financial engineering with background in fluid dynamics?
Replies: 16
Views: 5029

### Does any professor in financial engineering with background in fluid dynamics?

<t>Great to see you here, Daniel. And thank you all for your replies.I have a background in PDE/FDM, fluid dynamics and found financial job positions related to these areas are so few nowadays. Though I am now in a financial engineer position in a developing country, related exotic products, barrier...
September 18th, 2015, 12:08 pm
Forum: Careers Forum
Topic: Does any professor in financial engineering with background in fluid dynamics?
Replies: 16
Views: 5029

### Does any professor in financial engineering with background in fluid dynamics?

<t>I knew some quants like Dr. Wilmott have a background in fluid dynamics. Does any professor in financial engineering have a background in fluid dynamics?Especially does anyone know what?s the occupation of Daniel J. Duffy now, the author of the book ?Finite Difference Methods in Financial Enginee...
September 11th, 2015, 11:32 am
Forum: Student Forum
Topic: How to hedge exotic interest rate derivative under BGM model?
Replies: 3
Views: 2468

### How to hedge exotic interest rate derivative under BGM model?

<t>Thank you so much for your replies.I refer to Sami ATTAOUI?s paper ?Hedging Performance of the Libor Market Model: The Cap Market case?. The author indeed did as what bearish said. He constructed the hedging portfolio for a cap as below:?Given this 3-factor model, a delta-based hedge portfolio is...
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