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by Caesaria
December 1st, 2011, 5:25 pm
Forum: Technical Forum
Topic: variance swap replication using vanilla
Replies: 37
Views: 23369

variance swap replication using vanilla

<r>I am referring to the price of a variance swap based on papers such as this :<URL url="http://math.uchicago.edu/~sbossu/VarSwaps.pdf">http://math.uchicago.edu/~sbossu/VarSwaps.pdf</URL> .If it were to be calculated based on a series of puts and calls, the price of the variance swap at time T = 2/...
by Caesaria
December 1st, 2011, 2:17 pm
Forum: Technical Forum
Topic: variance swap replication using vanilla
Replies: 37
Views: 23369

variance swap replication using vanilla

<t>yeah log contracts are not liquid and traded actively on most markets, so the only instruments we can deal with practically (or that I am concerned with) are vanilla options and its underlying. In which case, basically you have to rebalance daily and pay ridiculous transaction costs and wide bid/...
by Caesaria
December 1st, 2011, 1:29 pm
Forum: Technical Forum
Topic: variance swap replication using vanilla
Replies: 37
Views: 23369

variance swap replication using vanilla

<t>I initially thought that static replication of a variance swap meant that you only need to buy a series of options with its corresponding weights and it would be like trading realized vs implied vol. Now I see that the weights are a function of time, in which case why is the "fair value" of a var...
by Caesaria
November 29th, 2011, 9:54 pm
Forum: Technical Forum
Topic: silly question on volatility
Replies: 5
Views: 16553

silly question on volatility

<t>So say we are currently at time T0. If the volatility from T0 to T1 is sig1 and the volatility from T0 to T2 is sig2. What is the volatility from T1 to T2? To put it in numbers, say we have 365 working days. The annualized volatility is 35%. If the volatility of a contract that expires 90 days fr...
by Caesaria
November 22nd, 2011, 1:30 pm
Forum: Technical Forum
Topic: PnL Explained for options
Replies: 11
Views: 22642

PnL Explained for options

Does anyone know of any nice source where I can see what "exactly" explains the daily change in an options price, when the underlying price moves and underlying implied vol moves.
by Caesaria
November 16th, 2011, 2:15 pm
Forum: Careers Forum
Topic: FO to Middle Office, bad career move?
Replies: 16
Views: 19566

FO to Middle Office, bad career move?

you got it spv, its the latter!
by Caesaria
November 16th, 2011, 1:43 pm
Forum: Trading Forum
Topic: Algorithmic Market Making
Replies: 9
Views: 20201

Algorithmic Market Making

<t>You are lucky your boss would even allow you to do that, I told him in the past that I would like to do something like this and he told me to go f**k myself. I can do it immediately since i have the infrastructure and ability in place, but you are assuming implicitly a correlation between the two...
by Caesaria
November 15th, 2011, 6:54 pm
Forum: Careers Forum
Topic: FO to Middle Office, bad career move?
Replies: 16
Views: 19566

FO to Middle Office, bad career move?

<t>For some reason I think that the FO quant job lacks rigor, it is requires just knowledge of some regression and you'll make the traders happy. I am contemplating moving to middle office in a highly quantitative exotic pricing role where teams are larger and you get to learn from tons of people wh...
by Caesaria
August 9th, 2011, 5:34 pm
Forum: Technical Forum
Topic: Cointegration in commodities
Replies: 11
Views: 24992

Cointegration in commodities

<t>QuoteOriginally posted by: bazzatFor energy commodities at least, in my opinion, cointegration relationships are primarily driven by fundamental relationships e.g. the relationship between power and gas is driven by the efficiency of CCGTs. When cointegation relationships change, I would expect t...
by Caesaria
June 28th, 2011, 8:42 pm
Forum: Economics Forum
Topic: Germany committed to kill the EUR?
Replies: 23
Views: 26899

Germany committed to kill the EUR?

<t>greece was a time bomb waiting to explode, it is actually an eastern european nation that faked its way into the european elite via being the locality of the ancient greek empire. romance led to excess interest in greece by Western Europe and America. Greece thrived through its tourism and shippi...
by Caesaria
June 20th, 2011, 2:39 pm
Forum: Trading Forum
Topic: Types of Index Arbitrage... anyone with experience in it?
Replies: 4
Views: 21050

Types of Index Arbitrage... anyone with experience in it?

<t>QuoteOriginally posted by: zeckpromicmost of the time, lead/lag effect can be caused by weights/capitalizations, the biggest caps are naturally selected by index/ETF issuers.if you can find evidences of lead/lag effect (granger causality test???), then it's still a speed game : already crowded .....
by Caesaria
June 20th, 2011, 1:17 pm
Forum: Trading Forum
Topic: Types of Index Arbitrage... anyone with experience in it?
Replies: 4
Views: 21050

Types of Index Arbitrage... anyone with experience in it?

<t>I would think that index arb is of 3 types :1. Arb between an Index ETF and its underlying.2. Arb between Index components in cash and Index futures based on interest rates/dividends etc.3. Arb between the leaders and laggers in an index. 1. and 2. is easy and makes sense. 3. makes sense as well,...
by Caesaria
June 15th, 2011, 9:38 pm
Forum: Student Forum
Topic: Pricing option with higher oder SDEs
Replies: 59
Views: 23099

Pricing option with higher oder SDEs

<t>QuoteOriginally posted by: frenchXHow would you price an option with a process like thatdY=mu(S,Y)*dt+sigma(S,Y)*dWwith dS=Y*dtso in fact it's a second order SDE.Y is a dummy variable to transform your second order SDE into 2 first order ones but your option contract V depends only on S and t.I h...
by Caesaria
June 14th, 2011, 12:18 pm
Forum: Careers Forum
Topic: hbs grads make 3.3 million over 20 year career: does this sound right to you?"
Replies: 16
Views: 22720

hbs grads make 3.3 million over 20 year career: does this sound right to you?"

20 years would include, the 1990? Weren't salaries "relatively" lower back then? I doubt the number was normalized for average salaries each year. Anyway that works out to be 165K a year to make it to 3.3 mil in 20 years. And oil/gas engineers easily make as much, in current day salaries.
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