How to Generate Correlated Assets and Why?

As soon as you will get into pretty complex derivatives, for example, you will need to generate correlated assets for pricing purposes. Example of such derivatives can be: Basket options Rainbox options Moutain ranges (created by Société Générale) The most complex amongst these derivatives cannot be priced using closed form formulae, Monte Carlo simulations are … Continue reading How to Generate Correlated Assets and Why?

Relationship between Commodity Prices and the Dollar

In this short article, I will try to explain the relationship between commodity prices and both dollar. We typically see a negative correlation between them, why is that and is this always true? Relationship between commodity prices and dollar As I just said, there is a relationship between commodity prices and the dollar. It means … Continue reading Relationship between Commodity Prices and the Dollar

How to be Gamma and Theta positive?

This is a question frequently asked during technical interviews. I will try to answer it through this short article giving examples and the logic behind them. Here are the main points I deal with here: Reminder: Gamma and Theta Black Scholes vs Real World Vertical Spread Conclusion - Smile skew Gamma Gamma is defined as … Continue reading How to be Gamma and Theta positive?

How to trade inflation?

Here is an overview of the questions I will try to answer in this short article: Briefly, what is inflation? How do central banks maintain inflation? How can investors protect their cash flows against inflation? By definition, inflation is an increase in the general price of goods and services over a time period. Its converse … Continue reading How to trade inflation?