Search results

Well, I have a Bloomberg terminal - what exactly do you need?

Couple simple fin de monde plays in the short end of the yield curve: (1) I am long March12 through June12 Fed Fund futures (500-1000-1000-500 contracts) against being short 5k of Mar12 Eurodollar futures (a futures-based proxy to FRA/OIS). It has done some already, but if Greece continues to...

My experience hedging VA portfolios tell me that there was a time when VA guarantees wheren't fairly priced (meaning they were cheap for the protection they've provided). I am pretty sure this is not the case now, if anything VA guarantees are pretty rich. I am willing to bet that any payoff...

I assume you are talking about fixed annuities. The first advantage is the tax treatment (why this loophole exists I do not understand, but it does). The second one is the embedded longevity option, you are not going to run out of money even if you live to 120. This said, pretty much evey...

Well, further out it would trade based on LIBOR swaps adjusted by LIBOR/Fedfund spread. The whole world now bootstrapes LIBOR swap curve using OIS discount, so it's not an issue

So what, you will get the appreciation of SPX paid out in appreciated GLD. The only way you could get scrwed is if USD is not a currency by that time.

Anyway, to make the long story short, lets say you want to buy an SPX call where payout will be converted to gold. So, you do the following: (a) buy a regulal call option on SPX, say 100 contracts of Dec 130 SPY Calls paying 6.2 (b) your premium, quanto-forward adjusted would be the amount of...

There is no way to replicate an option like this statically - you have to at least delta-hedge the GLD/SPX "exchange-rate" exposure. This said, in a low correlation case your re-balancing needs are going to be fairly small.

max(0, SPX(t)/SPX(0) - K) * GLD(t)/GLD(0) It's a fairly simple exotic called the quanto option where your payoff is paid out in a different currency. You could dynamically replicate it by buying a vanilla SPX option and re-balancing your GLD delta - you are going to be exposed to the...

In general, you want to remember what your wrote a few years ago before yapping about your 16 years of experience. A single look at your previous posts shows that your first message here was: So what is it and what exactly do you trade right now?

Interest rate options (BFOs/STIRO/Swaptions/CurveOptions etc). I am glad you are laughing... JGBs, for example, don't even have anything liquid option-wise trading past the front month. So I get 30 days at most.

But of course I am :D The whole point of posting on this web site is self-entertainment. Entertainment is important to me, especially now that my market is half-dead (well, today is a notable and pleasant exception). I am still unclear why you would not buy a one month straddle. If you truly...

No you don't. Frequency of hedging is a very tricky question - would you hedge your book "continually" if you are short gamma? if you are long gamma? long gamma in a trending market? However, experience of 15 years at a major investment bank and being a vol arb portfolio manager in a billion+...

If I had to say what the issue is, it's the fact that you believe in a "mechanical" system. Instead, you should build yourself a model of some sort that would tell you if now is a good time to buy vol or not. While you might have a right idea on the general bias of vol (e.g. implied vol for...

Yes, your theta-gamma decay would be inversly proportional to square root of time to expiry, but so is your gamma. As long as you are delta-hedging frequently enough and your realized vol is higher then your implied, you would be ok. Unless you are making some sort of realized vol statement...

I don't really see the logic in this statement. You have a vol model and if you feel implied vol is cheaper then your expected realization, you buy it. If your model is correct, you keep doing it and eventually you get statistically significant results. Income? As in if you are a seller of...

This is incorrect, you are misleading a lot of people.

Not true. Since 1970 (the index inception), DXY has lost (with a shortish bumps in the 80s and late 90s) about 40% of it's value. You could, if you want, use synthetic DXY do the same analysis over the last 60 years to reach similar conclusions.

As opposed to a guy who bought 1 ounce of gold in 1980 for $800/ounce and in 1985 the gold is worth $300? Anyway, if you do some real historical analysis, gold has been a pretty lousy store of value. Simple test - lets take workers compensation (skilled/manufacturing labor per hour) and see...

Could you, in this case, answer my question about degeneracy in you method or explain how you get around it?