Excel spreadsheet for higher order greeks?

[rmorse]

Quote from TskTsk:

Thanks, I checked out the links from you guys, unfortunately these all link to products that require buying. I was hoping there'd be some free spreadsheets for higher order greeks, since there are a lot of free spreadhseets for the standard order greeks. But if no such thing exists then I'll just suck it up and make one myself.


I'm sure if you manage sub 100k positions then the 4 basic greeks will do. But if you manage a 200MM hedgefund like I do, you're gonna need to go a level deeper.

What value does it give you? Does it generate income? Does it really give you a better picture of risk, that would make you do anything different? I know risk managers that monitor $5 billion multi asset funds including options that don't use it.

 

[TskTsk]

Quote from newwurldmn:

Why are you hanging out with us pikers? You can surely find better resources. No need to help you anymore.

Aww come on, I was just joking around...the only thing I manage so far has been my own money. Maybe some day...

Quote from rmorse:

What value does it give you? Does it generate income? Does it really give you a better picture of risk, that would make you do anything different? I know risk managers that monitor $5 billion multi asset funds including options that don't use it.

Probably half of the reason I'm trading is because I love the business. I like the charts, the math, the analysis. Yes I'm a nerd. The other other half reason is the money. Kill me for saying this, but not everything I explore in this business needs to be valuable or income generating to be interesting to me.

 

[syswizard]

Quote from rmorse:

What value does it give you? Does it generate income? Does it really give you a better picture of risk, that would make you do anything different? I know risk managers that monitor $5 billion multi asset funds including options that don't use it.

Exactly. Here we go with yet another "analysis paralysis" situation.

 

[Kevin Schmit]

Quote from TskTsk:

I was hoping there'd be some free spreadsheets for higher order greeks, since there are a lot of free spreadhseets for the standard order greeks.

Here attached is a first attempt at it.

Not quite complete. The higher-order greeks need checking. If you finish or improve it, please post your improved version.

Enter data only in the cells with colored background. You have to enable macros if you want it to solve for IV (if you input the put or call price instead of inputting the vol).

 

[sle]

Quote from TskTsk:
Aww come on, I was just joking around...the only thing I manage so far has been my own money. Maybe some day...

Ha, good one - got a rise out of a bunch of us. I was going to leave a response similar to what atticus said.

My experience is that instead of second order greeks you are best of looking at actual market scenarios. If you are building a portfolio in excel, it's fairly easy to run simple things like spot/vol scenarios. When I was at a fund, I've built something like that in R to add flexibility.

 

[atticus]

As sle stated, run what-if scenarios on price, vol and time. Price up, vol down; price down, vol up. Knowing your dgamma/dtime is not a heuristic. I don't understnad how knowing the raw-number is going to do anything for your risk-assessment. Certainly not in vanilla options.

Most have to do with contamination/skew risk. Model the portfolio VaR at jumps up/down in vola and time.

I know some really sharp people who don't measure their gamma. They look to their daily thetas ($-figure!) out to a week as a risk-measure, and perhaps a VaR figure at one to two sigmas.

 

[sle]

Quote from atticus:

They look to their daily thetas ($-figure!) out to a week as a risk-measure

In terms of understanding your position in terms of risk premium, theta is the most important Greek. No matter what the gamma/vega/vanna/volga are, if you are paying nominal theta, you are long risk premium and if you are collecting you are probably short risk premium. It gets murky in a non-vanilla book (especially on a book with a large VoV position), but the general gist is still there.

 

[rmorse]

Quote from sle:

In terms of understanding your position in terms of risk premium, theta is the most important Greek. No matter what the gamma/vega/vanna/volga are, if you are paying nominal theta, you are long risk premium and if you are collecting you are probably short risk premium. It gets murky in a non-vanilla book (especially on a book with a large VoV position), but the general gist is still there.

The most important Greek in a position is the one that has the largest value. It will create your forward P & L.

 

[KINGOFSHORTS]

Quote from TskTsk:

Thanks, I checked out the links from you guys, unfortunately these all link to products that require buying. I was hoping there'd be some free spreadsheets for higher order greeks, since there are a lot of free spreadhseets for the standard order greeks. But if no such thing exists then I'll just suck it up and make one myself.


I'm sure if you manage sub 100k positions then the 4 basic greeks will do. But if you manage a 200MM hedgefund like I do, you're gonna need to go a level deeper.

Man you would be a poor poker player, I call your bluff.

Your poker face of "I cannot afford to pay for shareware software" to manage a 200MM hedge fund is a very strong tell.

What it tells me is you are not managing at 200MM portfolio.

 

[KINGOFSHORTS]

Quote from sle:

Ha, good one - got a rise out of a bunch of us. I was going to leave a response similar to what atticus said.

My experience is that instead of second order greeks you are best of looking at actual market scenarios. If you are building a portfolio in excel, it's fairly easy to run simple things like spot/vol scenarios. When I was at a fund, I've built something like that in R to add flexibility.

I got trolled