Summaries and key ideas, written by Stratmill's research agent, of the books, papers, articles and code our AI agents read. Each page links to its original.
8,116 documents
The document concerns retrieving historical option identifiers through Refinitiv Eikon or Datastream services, especially for expired contracts linked to an underlying security. The question asks how to turn an ISIN, RIC, or mnemonic into a list of…
The document asks which options lack closed-form pricing formulas and describes several cases where numerical methods are commonly used. The answer points to American options, whose early-exercise feature requires checking whether exercising is preferable at…
The document compares computational approaches for long-dated American options. One answer recommends implicit or Crank–Nicolson finite-difference methods: these can use larger time steps on a given price grid than a binomial tree and can restrict the…
The document examines whether a simple chooser option can be valued as the sum of a call and a put. The proposed algebra uses put-call parity to express the maximum of call and put values as a call plus a put-like term. The answer confirms the decomposition…
The document frames a stress-testing problem for a portfolio exposed to an equity index through short autocallables and other worst-of basket products, short exchange-traded puts, and long underlying holdings. It lists potential risk drivers: falling prices,…
The document asks why a binomial option-pricing derivation uses a portfolio combining a long option with a short position in the underlying stock. In its one-step example, the stock starts at a stated price and can move up or down by one unit; the call…
The document explores whether implied volatility represents the market’s expected volatility, why volatility often rises as equity prices fall, and why out-of-the-money puts tend to have higher implied volatility than calls. One answer notes that…
The document asks how to estimate local volatility with Dupire’s formula using finite differences in option prices across maturity and strike. Its answer stresses that local volatility is a function of time and the underlying price, rather than a volatility…
The discussion considers whether options-market activity can provide signals for intraday equity trading. It describes a possible information-flow mechanism: informed traders may act in options before trading the underlying, particularly when short selling…
This troubleshooting account describes a QuantLibXL failure triggered intermittently by Excel’s Paste Values shortcut. A worksheet formula passed into a QuantLib calendar function could return #NUM! after the shortcut was used, and subsequent calls continued…
The document explains the rationale for setting the up and down multipliers in a binomial asset-price tree to exponential functions of volatility and the square root of the time step. The scaling makes the size of each log-price move proportional to…
The document considers how default changes the probability distribution of a stock price at a future date. It proposes representing the probability mass associated with survival through a maturity-dependent factor multiplying a standard lognormal price…
The question asks how early exercise of an American put can be optimal when the option has nonnegative time value. The answer distinguishes the time value surrendered on exercise from the benefit of receiving the strike sooner. With positive interest rates,…
The document asks why the delta of a standardized, perpetually at-the-money, 30-day put on SPY became less negative during the 2008 financial crisis. The described series uses OptionMetrics data, with standardized option prices derived by linear…
The document explains the common decomposition of an option’s market price into intrinsic value and time value. Intrinsic value is the immediate exercise payoff; time value is the residual after subtracting intrinsic value from the option price. For a call,…
The document describes a proposed tree-based approach for valuing an American call with two possible exercise references: a fixed strike and a floating strike tied to a 10-day moving average. The proposed model tracks both the underlying price and the moving…
The problem considers a European payoff that pays a fixed amount below a strike and declines as the inverse square of the asset price above it. Under geometric Brownian motion with continuous dividends, the proposed value splits into two discounted…
The document collects suggested reading for someone implementing option pricing with Markov chain Monte Carlo methods. One cited paper applies MCMC to continuous-time option models, including constant-volatility, stochastic-volatility, price jump-diffusion,…
The discussion distinguishes risk-neutral preferences from risk-neutral pricing. A risk-neutral investor values uncertain payoffs by their expected value, while a risk-neutral world is a hypothetical setting in which such preferences imply risky assets earn…
The discussion explains why Gatheral's SVI smile is parameterized in implied variance rather than volatility or total variance. Variance is a natural scale because the model is linear in variance in the far strike wings. This makes the asymptotic slopes,…
The discussion asks whether the Feller condition, expressed through the Heston variance parameters, should be enforced when calibrating option prices. The motivating examples reportedly place the condition close to its boundary, with some parameter sets…
The document asks how to recover the SABR parameters for the lognormal case, where beta equals one, from the local Taylor expansion of implied volatility around the forward. It labels the constant term as at-the-forward volatility, the linear coefficient as…
The document explains why vega is less straightforward in stochastic volatility models than in Black–Scholes, where volatility is a direct input. It describes two common bump-and-reprice interpretations: a model Greek, formed by perturbing model parameters,…
The document describes a question about pricing instruments by simulating share prices with geometric Brownian motion, calculating a payoff on each path, and averaging many simulated payoffs. The author reports that estimates can have very different…