x********o
发帖数: 519 | 1 In an equity market where the realised volatility of the underlying is 25%,
some- one proposes to sell you a call at an implied volatility of 20%.
1. Assuming that the realised volatility is going to remain constant at 25%
until the expiry of the option, explain how it is possible to make money
from that opportunity.
2. Let’s now assume that only the expectation of the realised volatility is
25%, and that the number of fixings is big enough. Is it always possible to
make money in that case? | W*******d
发帖数: 63 | 2 1. dynamic hedging to earn 25% realized vol
,
%
is
to
【在 x********o 的大作中提到】
: In an equity market where the realised volatility of the underlying is 25%,
: some- one proposes to sell you a call at an implied volatility of 20%.
: 1. Assuming that the realised volatility is going to remain constant at 25%
: until the expiry of the option, explain how it is possible to make money
: from that opportunity.
: 2. Let’s now assume that only the expectation of the realised volatility is
: 25%, and that the number of fixings is big enough. Is it always possible to
: make money in that case?
| g******e
发帖数: 352 | 3 1. dynamic delta hedging, you will make money because your hedging cost (
which depends on the realized vol) will be less than the option premium (
which depends on the implied vol).
2. what is the number of fixing? in this case, you have to do a large number
of this kind of trade to make money.
,
%
is
to
【在 x********o 的大作中提到】
: In an equity market where the realised volatility of the underlying is 25%,
: some- one proposes to sell you a call at an implied volatility of 20%.
: 1. Assuming that the realised volatility is going to remain constant at 25%
: until the expiry of the option, explain how it is possible to make money
: from that opportunity.
: 2. Let’s now assume that only the expectation of the realised volatility is
: 25%, and that the number of fixings is big enough. Is it always possible to
: make money in that case?
| x********o
发帖数: 519 | 4 I do not know it neither.
your solution makes sense.
number
【在 g******e 的大作中提到】
: 1. dynamic delta hedging, you will make money because your hedging cost (
: which depends on the realized vol) will be less than the option premium (
: which depends on the implied vol).
: 2. what is the number of fixing? in this case, you have to do a large number
: of this kind of trade to make money.
:
: ,
: %
: is
: to
| n******m
发帖数: 169 | 5 Do you think a traddle will work? Seems to be not a bad idea in the first
case. | g********t
发帖数: 11 | 6 1: The call option depends on implied vol. 20% is undervalued.
If we can short put option depending on vol=25%, we can buy call (vol =
20%), then short put (vol = 25%), short underlying asset; then there is
arbitrage oppurtunity.
dynamic delta hedging make sense even when we don't know the put option
pricing on the market. In dynamic delta hedging, we should short the stock and dynamically adjust the shares of stock.
number
【在 g******e 的大作中提到】
: 1. dynamic delta hedging, you will make money because your hedging cost (
: which depends on the realized vol) will be less than the option premium (
: which depends on the implied vol).
: 2. what is the number of fixing? in this case, you have to do a large number
: of this kind of trade to make money.
:
: ,
: %
: is
: to
| q*******k
发帖数: 1103 | 7 just static hedge it man.
buy at 20% and sold at 25, simple as it is.
hahha
,
%
is
to
【在 x********o 的大作中提到】
: In an equity market where the realised volatility of the underlying is 25%,
: some- one proposes to sell you a call at an implied volatility of 20%.
: 1. Assuming that the realised volatility is going to remain constant at 25%
: until the expiry of the option, explain how it is possible to make money
: from that opportunity.
: 2. Let’s now assume that only the expectation of the realised volatility is
: 25%, and that the number of fixings is big enough. Is it always possible to
: make money in that case?
|
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