Timeline for Using Daily or Annual Volatility to Price an Option
Current License: CC BY-SA 4.0
6 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| Mar 16, 2023 at 6:39 | vote | accept | jmac | ||
| Mar 15, 2023 at 19:06 | comment | added | rubikscube09 | @Newquant could you briefly show how you got the implied autocorrelation? Ty! | |
| Mar 15, 2023 at 14:13 | history | edited | Newquant | CC BY-SA 4.0 | added 746 characters in body |
| Mar 15, 2023 at 14:10 | comment | added | Newquant | q1) if you long at 0.1, and short at 0.2, then you've made money. Your future p/l is locked in, there's just a m2m disparity between long and short because of where/who you're marking with. q2) I got this wrong (and will edit my answer), hedging residual delta from a model won't help here to minimise decay. Actually what it will do is smooth out the equity curve on a daily level (each day has less volatile p/l), but introduce more uncertainty into the final payoff. If you didn't hedge then your final payoff is certain (the spread), but the path is more volatile. This is confirmed by sims. | |
| Mar 15, 2023 at 4:27 | comment | added | jmac | A couple quick questions: To be clear, am I correct in saying that if you buy the option from the bank at the lower 0.1 volatility, then by hedging your position, you will gain money/profit? Also, how does hedging delta minimize theta decay between long and short? | |
| Mar 13, 2023 at 12:27 | history | answered | Newquant | CC BY-SA 4.0 |