Options
A verification model to capture option risk and hedging based on a modified underlying beta
This paper analyzes the relationship between option risk and expected return from the perspective of the underlying beta, and estimates the degree of correlation.
Vix vulnerable to retail short squeeze, analysts warn
Volatility products could see more wild swings as dearth of vol sellers exacerbates spikes
Held in suspense: late futures orders blamed for Covid meltdown
Buy-side use of average pricing contributed to rash of failed trades and give-ups last March
Exchange of the year: CME Group
Risk Awards 2021: changes to options strikes helped CME avoid major mishaps in volatile 2020
Derivatives client clearer of the year: JP Morgan
Risk Awards 2021: bank avoided tech snags and margin call surprises that plagued peers during crisis
Clearing house of the year: Eurex Clearing
Risk Awards 2021: clearer’s Prisma margin model proves its mettle in year of market tumult
Options pricing framework buckles under GameStop frenzy
Wild retail trading sees calls sink below intrinsic value ahead of expiry as puts break spot correlation
Futures industry weighs need for new post-trade utility
Three large FCMs say standardising trade allocations could prevent a repeat of breaks seen during Covid volatility
Quants of the year – Jim Gatheral and Mathieu Rosenbaum
Risk Awards 2021: rough volatility models could make the options market more efficient
ETF options: the market’s latest credit hedge
Investors look to derivatives on fixed income exchange-traded funds to manage credit risk exposure
Goldman, IBM lay out quantum road map for derivatives pricing
Researchers estimate 7,500 logical qubits and 46 million T-gates would be needed to price options
Ten laws of operational risk
This paper sets out ten laws that govern the behavior of operational risk relating to the occurrence and detection/duration of events; the rapidity with which firms suffer losses; the lags in crystallization of losses; and internal and external drivers…
Semi-closed-form prices of barrier options in the Hull-White model
New pricer for options with time-dependent barrier shown to be computationally efficient and stable
Margin rules snare FX options users
US banks forced to post margin on ‘naked’ trades, with buy-side firms soon to follow
Strangle to resuscitate: evidence from India
This study examines the performance of two strangle strategies at different legs to find the best strategy for consistent profit generation when trading on the Indian stock market index Nifty.
Nasdaq retail rush powers intraday momentum trade
Options and ETFs give tech index new momentum, while S&P 500 sees higher levels of mean reversion
Strike a pose: deal contingents back in vogue after mid-year slump
M&A revival breathes life into deal contingent trades, but elevated risk keeps prices high
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
Smaller drawdowns, higher average and risk-adjusted returns for equity portfolios, using options and power-log optimization based on a behavioral model of investor preferences
The authors use a power-log utility optimization algorithm based on a behavioral model of investor preferences, along with either a call or a put option overlay, to reverse the negative skewness of monthly Standard & Poor’s 500 (S&P 500) index returns…
Ice tees up CDS options launch for November 9
Fight for CDS market share heats up as Ice begins clearing options and LCH preps CDX offering
One man’s trash is another man’s Treasury
With yields at record lows, investors are asking how much protection bonds will offer in a future crisis
Jerome Kemp on the skewed economics of clearing
Only Fed intervention prevented “a really big market disaster” during Covid, says derivatives veteran
Regulators should set ‘guidelines’ for CCP margins – Kemp
Citi’s former clearing head says CCPs are still competing on margin
FX volatilities fall on receding US election fears
Polls point to a decisive Biden win – though some worry market is being complacent