derivatives-pricing

In another discussion the user zer0hedge provides an excerpt from definitions of CALL from a book of 1904 from S.A.Nelson which contains the following: ... and before its maturity if it shows you a profit, you are obliged to trade in the open market and then balance the operation on settlement day" ... This makes it similar to American Call in one aspect, but a bit worse (the "obliged" part), whe…

Part one of this series ended on a claim: for a venture-backed company that recently raised, the enterprise value is not really the hard part. Someone paid a price in an arm's-length transaction and that price is your anchor. The hard part is allocation — turning one enterprise value into a per-share value for each of the seven classes on your cap table, each with different preferences, each conv…

While trying to price an option on a future using a binomial tree, I found out in a manual (Actuarial Finance by Boudreault and Renaud) that we need to calculate $F_0$ , and then apply the up and down factor on this value. I am wondering why we don't model the stock value instead and use the formula $F_t^T = S_t\exp(r(T-t))$ ? For me this seems more intuitive; it would give us the same value for …

In the past I've only ever traded OTC options, and never really thought about the following: If you trade a European OTC option you post/receive cash collateral and on this collateral you receive/pay interest. This is in line with no-arbitrage since one needs to borrow money to post collateral and the interest received on the collateral goes to paying the interest on the loan. Now suppose you tra…

How to get the most out of an option chain: A POC demo using SOPHIE Option Viewer. 🎥 Video Tutorial • 📈 Options Strategy 🎥 Watch Video: https://youtu.be/oaOJv1NfQfw Topics: quantitative finance, investment analysis, financial education, options trading, derivatives

If involved in Risk arb (M&A arb) this should likely be of interest Hot from the press Collared takeover exchange options with ratio barriers: practical extensions of the Haug–Haug knock-in/out Margrabe formula Statistics: Posted by Collector — 53 minutes ago — Replies 0 — Views 21

I am looking to price a Bermudan-callable EUR/USD cross-currency interest rate swap in QuantLib. Assume a three-factor model with: one Hull-White model for USD rates, one Hull-White model for EUR rates, a Black-Scholes FX process, correlations between both rate factors and FX, the appropriate quanto/measure-change drift adjustment. Pricing would require Monte Carlo with Longstaff-Schwartz regress…

A rigorous but accessible walkthrough of risk-neutral pricing - the change of measure, no-arbitrage principle, the fundamental theorem of asset pricing, and why option prices are expectations under Q, not P.

In March 2025, IndusInd Bank disclosed discrepancies in account balances associated with its derivatives portfolio. An initial internal review estimated an adverse effect equivalent to approximately 2.35% of the bank’s net worth at 31 December 2024. An independent review subsequently Read More ... The post IndusInd Bank Derivatives Case Study: Control Failures first appeared on Risk Management As…

A comprehensive guide to the empirical efficacy of technical, volatility, and macroeconomic indicators in harvesting the Variance Risk Premium through systematic SPX option selling. Master VIX/VXV ratios, Morning VVIX anomalies, mean-reverting tactical indicators, and dynamic position sizing for optimal risk-adjusted returns. 📊 Deep Research • 📈 Options Strategy Topics: quantitative finance, in…

Deep and liquid derivatives markets are fundamental to the development of well-functioning financial markets and... Read more Building Markets, Creating Opportunity