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Option Pricing Model in Illiquid Markets

Posted on April 27, 2022 By 
Black-Scholes-Merton (BSM) is an option pricing model for valuing European options. It was developed in the 1970s by Fisher Black, Myron Scholes, and Robert Merton, of whom two were awarded the Nobel Prize in Economic Sciences in 1997 for their work. The BSM model has become one of the most …
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Debt/Equity Ratio: Calculator, Example

Posted on April 22, 2022 By 
We have already covered the debt/equity ratio formula in detail before. However, you should also know what it is and how to use it. In this article, we will discuss this ratio with the help of concrete examples. What is the Debt/Equity Ratio? The debt/equity ratio compares the different elements …
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Statistical Arbitrage Using a Jump-Diffusion Model

Posted on April 18, 2022 By 
Statistical arbitrage is a classic quantitative trading strategy that attempts to take advantage of statistical differences in the prices of assets. The strategy is based on the idea that if two assets are not perfectly correlated, then there is an opportunity to profit from the difference in their prices. Statistical …
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Where Do Options Returns Come From

Posted on April 15, 2022 By 
Short volatility is a popular trading strategy that seeks to profit from selling volatility through Exchange Trade Notes or listed options. It is understood that the profit comes from the volatility risk premium, i.e. the fact that implied volatility generally overstates actual volatility. Some investors even consider this overstatement a …
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Butterfly Spreads for Harvesting Risk Premia

Posted on April 12, 2022 By 
We have discussed trading strategies for harvesting volatility risk premium. In a similar context, Reference examined the use of butterfly option positions as a trading strategy for long-term investors. An option butterfly position is a limited risk, non-directional options trading strategy that is designed to take advantage of a …
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Market Intraday Momentum and Hedging Demand

Posted on April 6, 2022 By 
Day trading is a trading strategy whereby traders aim to take advantage of small price movements in the market. To do this, they buy and sell securities within the same day. Day traders typically use technical, quantitative, or sentiment analysis to make decisions about when to buy and sell.  There …
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