Grudge Match - The Saga Continues......
- Thread starter baracudax
- Start date
Re: Grudge Match - The Saga Continues......
Interesting to have so many financial gurus playing GM here. Let's try this:
In most asset markets, returns appear more leptokurtic than is assumed by a lognormal distribution. Market leptokurtosis would make way out-of-the-money or way in-the-money options more expensive than would be assumed by the Black-Scholes formulation. In such cases, would the option market demonstrate:
A volatility smile, or a volatility skew?
Cambodia. Low base.TripleM said:
Interesting to have so many financial gurus playing GM here. Let's try this:
In most asset markets, returns appear more leptokurtic than is assumed by a lognormal distribution. Market leptokurtosis would make way out-of-the-money or way in-the-money options more expensive than would be assumed by the Black-Scholes formulation. In such cases, would the option market demonstrate:
A volatility smile, or a volatility skew?
Re: Grudge Match - The Saga Continues......
i meant the vantage of cos!
vietnam or cambodia? hmmm i wud say vietnam...at least the central government has few internal conflicts. cambodia cant even decde if they shud punished the criminals from pol pots era.
Ken
volatilit skew.. cos homoskedasticiity is unrealistic assumption.
i kw wat que to ask - stock mkt prices follows random walk or not?
TripleM said:AM makes DB8 ? ...makes are AMV8, DB7, DB9 and Vanguish....
911, the 997 pls
Which country's economy looks more promising?
Vietnam
or
Cambodia?
i meant the vantage of cos!
vietnam or cambodia? hmmm i wud say vietnam...at least the central government has few internal conflicts. cambodia cant even decde if they shud punished the criminals from pol pots era.
Ken
volatilit skew.. cos homoskedasticiity is unrealistic assumption.
i kw wat que to ask - stock mkt prices follows random walk or not?
Re: Grudge Match - The Saga Continues......
Volatility Smile. By increasing prices for such options, volatility smile could be the markets' indirect way of achieving such higher prices within the framework of the Black-Scholes model.
chicken nuggets on me...
kenntona said:
Volatility Smile. By increasing prices for such options, volatility smile could be the markets' indirect way of achieving such higher prices within the framework of the Black-Scholes model.
chicken nuggets on me...
Re: Grudge Match - The Saga Continues......
Vol smile
Heard of NAB's Options desk lost in excess of usd 300 mio sometime ago?
That relates to Vol smile vs Flat Vol trading....
Easy one,
Double No Touch or so called Range Binary...For the same barriers on either side (say 5pct either side from current spot..
Which one is more expensive to buy?
a 3mth contract
or
a 6mth contract ?
kenntona said:
Vol smile
Heard of NAB's Options desk lost in excess of usd 300 mio sometime ago?
That relates to Vol smile vs Flat Vol trading....
Easy one,
Double No Touch or so called Range Binary...For the same barriers on either side (say 5pct either side from current spot..
Which one is more expensive to buy?
a 3mth contract
or
a 6mth contract ?
Re: Grudge Match - The Saga Continues......
Yes, Jason. Chicken nuggets 20 pieces please.
Behavioural finance. Which one describes you better?
Prospect Theory, where you place different weights on gains and losses and on different ranges of probability. You are much more distressed by prospective losses than they are happy by equivalent gains. Thus you consider the loss of $1 dollar twice as painful as the pleasure received from a $1 gain. As such you are willing to take more risks to avoid losses than to realize gains. Faced with sure gain, you are risk-averse, but faced with sure loss, you become risk-takers.
or
"Fear of Regret" - you tend to feel sorrow and grief after having made an error in judgement. You avoid selling stocks that have gone down in order to avoid the pain and regret of having made a bad investment. You follow the crowd and conventional wisdom to avoid the possibility of feeling regret in the event that your decisions prove to be incorrect. You find it easier to buy a popular stock and rationalize it going down since everyone else owned it and thought so highly of it.
totoseow said:
The answer is volatility skew. As totoseow pointed out, homoskedasticity is an unrealistic assumption, as with lognormally distributed returns. If the return on most assets are leptokurtic, OTM and ITM options will be more expensive than would be assumed by the Black-Scholes model. But because the returns are not lognormal, the volatilities across board will exhibit a skew than a smile.jaskin said:
Yes, Jason. Chicken nuggets 20 pieces please.
Random walk for sure, even if a trend is established.totoseow said:
Behavioural finance. Which one describes you better?
Prospect Theory, where you place different weights on gains and losses and on different ranges of probability. You are much more distressed by prospective losses than they are happy by equivalent gains. Thus you consider the loss of $1 dollar twice as painful as the pleasure received from a $1 gain. As such you are willing to take more risks to avoid losses than to realize gains. Faced with sure gain, you are risk-averse, but faced with sure loss, you become risk-takers.
or
"Fear of Regret" - you tend to feel sorrow and grief after having made an error in judgement. You avoid selling stocks that have gone down in order to avoid the pain and regret of having made a bad investment. You follow the crowd and conventional wisdom to avoid the possibility of feeling regret in the event that your decisions prove to be incorrect. You find it easier to buy a popular stock and rationalize it going down since everyone else owned it and thought so highly of it.
Re: Grudge Match - The Saga Continues......
seismo mate...these things r huger than anything else...heard from my son anyway..keke.
i think hurricane falls between summer n n fall.
which sea-creature sticks to their father until maturity?
whale-sharks or seahorse?
seismo mate...these things r huger than anything else...heard from my son anyway..keke.
i think hurricane falls between summer n n fall.
which sea-creature sticks to their father until maturity?
whale-sharks or seahorse?
