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

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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…

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