In option pricing theory, the risk-neutral measure is a measure that allows for the valuation of financial instruments such as options. The risk-neutral measure is obtained by assuming that investors are indifferent to the risk and that the expected rate of return on all assets is equal to the risk-free …

Technical indicators are mathematical calculations based on the price, volume, or open interest of a security or index. They are used to help traders and investors analyze the behavior of securities in order to make informed investment decisions. Technical indicators are commonly used in technical analysis, which is a method …

In the financial markets,  a lead-lag relationship is a type of correlation in which the performance of one asset precedes that of another. This means that when the price or performance of one asset increases or decreases, the price or performance of a second asset follows suit. This type of …

Implied volatility is an estimation of the future volatility of a security’s price. It is calculated using an option-pricing model, such as the Black-Scholes model, as it takes into account various factors including the current price of the underlying asset and its strike price. Implied volatility helps investors to gauge …

Machine Learning (ML) is a type of Artificial Intelligence (AI) that provides computers with the ability to learn without being explicitly programmed. It focuses on the development of computer programs that can access data and use it to learn for themselves. The process of learning begins with observations or data, …

Options are contracts that allow traders to buy or sell a security at a predetermined price. Options give the holder the right, but not the obligation, to buy (call option) or sell (put option). They are traded on exchanges like stocks and have their own ticker symbols. Options can be …

Would you rather choose a trading system that wins small amounts most of the time but when it loses, the loss is big? Or would you rather choose a trading system that loses small amounts most of the time but when it wins, the gain is big? In this blog …

It is generally accepted that commodity prices can have an impact on equity markets, as the prices of commodities can affect the profitability and performance of companies in various sectors. For example, a rise in the price of oil may benefit companies in the energy sector, while a decline in …

In the financial markets, the momentum anomaly is a phenomenon in which financial assets that have had recent positive returns tend to continue performing well, while those with recent negative returns tend to keep declining. It is also known as the ‘momentum effect’ and has been observed in stocks, commodities, …

Option pricing is usually carried out in the risk-neutral world where the market participants are assumed to be indifferent between taking a certain payoff or investing in an asset with that same expected return. Mathematically, an option’s price is the expected value of its payoff in the risk-neutral measure discounted …