Who will speak for the Kingdom? Bloomberg’ 21st April piece on His Royal Highness Prince Mohammad bin Salman (MBS) makes for an interesting read. It is the latest in a series of profiles that paint a portrait of the prince with unfettered access (for the
Better Excel Charts. Add clarity, impact to your presentation Sometimes in the midst of an exploratory trip with a data set a relationship just jumps out and surprises you. This happened yesterday evening as I was fooling around with a thesis. While doing my work I noted down
The knives are out in the oil market. It has been an interesting twelve months. Between bottoms, volatility, rumors and market shifts we have seen many interesting plays at work when it comes to trading crude oil. Depending on who you speak with, low crude
Bank Asset Liability Management (ALM) – Default ALM strategies. In our last post we looked at a history of US Treasuries yield curve shifts between 1978 and 2010. We now move to a simplified analysis of the maturity distribution of assets and liabilities on a
A visual history of USD Treasury yield curve shifts – 1978 – 2014. While we have spent a fair bit of time discussing Asset Liability Management models, we really haven’t spent enough time discussing interest rates. Specifically the historical behavior of US Treasury yield curve.
The startup scene in Karachi. I came back home (Karachi) in 2003 and for a list of odd reasons decided to decline two respectable offers to shift to startup mode again. The first two years were a slog. The network I had left when I
Implied volatility and relative hedging P&L. Four scenarios to set things right. We go back to a simple world where implied volatility can take four possible values. 10%, 20%, 30% and 40%. As a trading desk we can write and sell options at each of
Building an illustrative Vega and Gamma hedging model in Excel. We build a simple Excel spreadsheet that allows us to hedge Gamma and Vega exposure for a single short position in a call option contract. Gamma and Vega hedges are created by buying cheaper out
Hedging portfolio Vega and Gamma using solver. Lesson Five For our portfolio model we need an objective function that allows us to minimize the cumulative Greek gap across maturity buckets with respect to Vega and Gamma between the short positions and the proposed hedge portfolio.
Option Greeks. Option Hedging using Excel. Since a spot, forward or future position is linear in its pay off it has no second order derivative. Options on the other hand are non-linear (asymmetric payoffs). While we can get away with hedging Delta with a linear