It's useless to say that it needs to be rescaled to get the sum of probabilities equal to unity. Masteratwork
+1, there would be no need of options :p .
True . As a practical way to do it, you can estimate implied distribution with at least 3 calls with closed strikes. Assume 3 calls C1 C2 C3...
My bad, I thought you wrote "I am pretty sure that I have a decent options system if I didn't have to worry about delta neutrality, but that is...
Hi nitro, As a trader who used to price variance swaps, I don't get it. Since you quote a variance swap, you need a lot of vanilla strikes...
Are you sure about that ?
Risk neutral distribution is the probability distribution that makes the expected future price be (today) forward price. Because the trend of an...
Hi nitro, Why are you comparing risk neutral distribution with real one ? Risk neutral distribution is just a tool to price derivatives. In...
Vol of vol is related to volatility. It just means that vol fluctuates. dvega/dvol is related to the sensitivity of a vega. There is no vega...
Hi Martinghoul, I see your point, but the fact that there are autocorrelation and/or vol of vol doesn't change forward vol. Forward vol is...
'would be nice :)
HI Martinghoul What do you mean with "In the presence of vol of vol, the equation doesn't have to hold" ? The equation is based on the...
Hi, you have a lower boundary for vol2 vol2=vol1*SQRT(T1/T2) There is no way Vol2 be lower that level. If it were, that would tells you...
Well, you don't price an option with IV, you quote an option with IV. In some models like BS, you price an option with HV. IV is always unknown....
I didn't write something about quoting options without pricing model. What I've written is that market doesn't know future. So, it doesn't know...
Hi Mark, happy new year, Sorry, IV has nothing to do with future volatility ! How the market would know it ? IV is just what makes your...
Both could be at the money !
OP, You'd have a positive time decay if you trade a spread. The only thing you 'd have to check, is that the option sold is near at the money....
Back of the envelope calculation seems to valid your numbers. What matters with those datas ?
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