# Tag Info

0

Lets construct a simple example that shows a use case of Market Making. Assumptions: You're are the only market maker for a very illiquid S&P 500 ETF S&P500 Level: 100 S&P500 Futures Level: 99 / 101 S&P ETF mid price: 100$As the only Market Maker your job is to provide the market with liquidity. So you want to set sell and buy prices on ... 0 For more than 2 correlated assets, you should use the cholesky decomposition of the correlation matrix. Please read this article for further information: https://myfinancialmarkets.club/2018/01/06/how-to-generate-correlated-assets-and-why/ As for testing, you can try to price basket options with your generated paths and compare them with values in the ... 1 CRSP_SPvw includes dividends and CRSP_SPvwx excluding dividends. 1 I have a take on the intuition part of the question. Isn't it a simple consequence of Jensen's inequality? Thus, assuming$r=0$for simplicity, we have in the money market measure:$E(S_T)=S_t$, but then$E(1/S_T)>1/S_t$by Jensen since$1/x$is convex. Now in the stock measure, we must force$E_S (1/S_T)=1/S_t$to create the correct martingale, but ... 3 The drift is the expectation of the return over an infinitesimal interval. Let$Q$be the risk-neutral measure and$Q^Sbe measure associated with the stock price numeraire defined by \begin{align*} \frac{dQ^S}{dQ}\big|_t = \frac{S_t}{B_t S_0}, \end{align*} whereB_t=e^{rt}$is the value at time$t$of the money-market account. Moreover, let$E$and$E^S\$ ...

4

As a general principle, I would be wary of economic or financial interpretations of change of measure techniques. Changing numéraires is merely a mathematical tool to ease pricing, see for example the last part of this answer. Nevertheless, here’s my take on your question. Think of a numéraire as the basic financial asset of your economy, namely a store of ...

0

A lot of ht e liquidity disappears after close so for that reason alone it is more expensive. The spread is much wider. To find someone willing to trade on the close price after close is the same thing as trying to find someone willing to trade on the price from 1 pm at 2 pm.

1

Sorry if I'm slightly wrong on this did the IMC a long long time ago, but before the closing auction price which is the EOD close there is the opening auction price. The code is OFFICIAL_OPEN_AUCTION_PRICE or PQ814 Tip for searching in Bloomberg when you do get to use one is to load up the security you require and then type FLDS, then use this to search ...

3

Yes and no. Clearly, stock prices (or prices of any asset) are not observed continuously. This applies to both, the value (price) dimension and the time dimension. This however does not mean that we can't model stock prices as a time and space continuous process. Frequently, time and space continuous approaches are more elegant and yield nicer results. ...

2

To hedge your long call option (which as a delta between 0 and 1), you had to short sell some stock. If the stock price crashes the option you are long of is less in the money (or further out of the money). Therefore you are overhedged by your short stock position and need to buy back some stock. You can also think in terms of gamma. Your long vanilla ...

Top 50 recent answers are included
{"ft_lang_label":"__label__en","ft_lang_prob":0.89053684,"math_prob":0.9347951,"size":4630,"snap":"2019-51-2020-05","text_gpt3_token_len":1246,"char_repetition_ratio":0.11716386,"word_repetition_ratio":0.010243278,"special_character_ratio":0.28034556,"punctuation_ratio":0.09944751,"nsfw_num_words":0,"has_unicode_error":false,"math_prob_llama3":0.9549269,"pos_list":[0],"im_url_duplicate_count":[null],"WARC_HEADER":"{\"WARC-Type\":\"response\",\"WARC-Date\":\"2020-01-19T22:04:32Z\",\"WARC-Record-ID\":\"<urn:uuid:7e17226c-9785-4cce-b849-047947477fa8>\",\"Content-Length\":\"107385\",\"Content-Type\":\"application/http; msgtype=response\",\"WARC-Warcinfo-ID\":\"<urn:uuid:7dfe9da8-6ac5-4df1-83ea-365ab9d1cf11>\",\"WARC-Concurrent-To\":\"<urn:uuid:6fc3a665-179d-43ca-9264-57669e999534>\",\"WARC-IP-Address\":\"151.101.1.69\",\"WARC-Target-URI\":\"https://quant.stackexchange.com/tags/equities/new\",\"WARC-Payload-Digest\":\"sha1:4KN7EMUT2PHMEFQLVXD26DFC7SOQWTEA\",\"WARC-Block-Digest\":\"sha1:TMPBDNZ3YCRW22QSYSDKUKPVDOCINVQK\",\"WARC-Identified-Payload-Type\":\"text/html\",\"warc_filename\":\"/cc_download/warc_2020/CC-MAIN-2020-05/CC-MAIN-2020-05_segments_1579250595282.35_warc_CC-MAIN-20200119205448-20200119233448-00222.warc.gz\"}"}