JonathanData, Derivatives, Mathematica, Matlab, OptionsData Analysis, Historical data, Mathematica, Options

Read More
Home Archive by Category "Options"

JonathanMarket Timing, Moving Average, Option Replication, Technical Analysis1 commentGlabadanidis, Market Timing, Moving Average Rule, Option Replication, SPY, Zakamulin

Almost at the very moment I published a post featuring some interesting research by Glabadanidis (“Market Timing With Moving Averages” (2015), International Review of Finance, Volume 15, Number 13, Pages 387-425 – see Yes, You Can Time the Market. How it Works, And Why), several readers wrote to point out a recently published paper by Valeriy Zakamulin, (dubbed the “Moving…

JonathanBinomial Model, Market Timing, Moving Average, Option Replication, Options, Technical AnalysisAsian Option, Market Timing, Moving Average, Moving Average Rule, Option Replication, Option Theory, REITs, SPY ETF, Technical Analysis

One of the most commonly cited maxims is that market timing is impossible. In fact, empirical evidence makes a compelling case that market timing is feasible and can yield substantial economic benefits. What’s more, we even understand why it works. For the typical portfolio investor, applying simple techniques to adjust their market exposure can prevent…

Summary Leveraged ETFs suffer from decay, or “beta slippage.” Researchers have attempted to exploit this effect by shorting pairs of long and inverse leveraged ETFs. The results of these strategies look good if you assume continuous compounding, but are often poor when less frequent compounding is assumed. In reality, the trading losses incurred in rebalancing…

JonathanOptions, Stochastic Differential Equations, Volatility ModelingJump Diffusion, Options, Smile, Volatility

The “implied volatility” corresponding to an option price is the value of the volatility parameter for which the Black-Scholes model gives the same price. A well-known phenomenon in market option prices is the “volatility smile”, in which the implied volatility increases for strike values away from the spot price. The jump diffusion model is a…

JonathanFinancial Engineering, Forecasting, Long Memory, Multifactor Models, Options, REGARCH, S&P500 Index, Volatility ModelingMultiFactor Models, Option Pricing, REGARCH, S&P500 Index

The research in this post and the related paper on Range Based EGARCH Option pricing Models is focused on the innovative range-based volatility models introduced in Alizadeh, Brandt, and Diebold (2002) (hereafter ABD). We develop new option pricing models using multi-factor diffusion approximations couched within this theoretical framework and examine their properties in comparison with…

JonathanDirection Prediction, Forecasting, Modeling, Options, S&P500 Index, Volatility Modeling, volatility sign prediction forecasting EngleDirection Prediction, Financial engineering, Log-Normal, Option Pricing, S&P500 Index, Stochastic Volatility, Volatility, Volatility Dynamics

As regards the question of forecasting accuracy discussed in the paper on Forecasting Volatility in the S&P 500 Index, there are two possible misunderstandings here that need to be cleared up. These arise from remarks by one commentator as follows: “An above 50% vol direction forecast looks good,.. but “direction” is biased when working with…

JonathanBlack Noise, Cointegration, Derivatives, Direction Prediction, Dispersion, Forecasting, Fractional Brownian Motion, Fractional Cointegration, Fractional Integration, Long Memory, Mean Reversion, Momentum, Multifactor Models, Options, Pink Noise, REGARCH, Regime Shifts, Volatility Modeling, White NoiseBlack Noise, Cointegration, Direction Prediction, Fractional Brownian Motion, Fractional Cointegration, Fractional Integration, GARCH, Long Memory, Mean Reversion, Momentum, MultiFactor Models, Pink Noise, REGARCH, Regime Shifts, Volatility, Volatility Dynamics, White Noise

I am planning a series of posts on the subject of asset volatility and option pricing and thought I would begin with a survey of some of the central ideas. The attached presentation on Modeling Asset Volatility sets out the foundation for a number of key concepts and the basis for the research to follow. Perhaps…

Load More

Quantitative Research And Trading © 2016 All rights reserved.