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Love the content you put out. I was wondering if you would possibly do one on the Bjerksund-Stensland Option Pricing Model? Very interested in how that would be performed on Excel.
Howdy man ¡ Would you considered making a video regarding the SBM (FRTB SA) ? I think it would be quite interesting if you could explain how to calculate delta vega and curvature of the trading book. Thank you in advance
Awesome video. One questions, in the second half of the video, why do you use the strike price to calculate the cash payoff instead of the discounted strike price? This deviates from the original put call parity formula so I did not follow this. Thanks in advance.
K*e^-rt is just a zero coupon bond discounted at the risk free rate (r) for a certain amount of time (t), where K is equal to the notional value of the bond. It assumes continuous compounding of interest (that is where e comes in)
Any mispricing like this shouldn't exist for more than a fraction of a second before high frequency traders secure the arbitrage and force put-call pricing back into parity
I'm not an expert, but I imagine it will occur whenever someone does a price-changing purchase without a corresponding parity purchase on the other side (i.e. inefficient execution of purchasing a particular risk exposure).
@@victoricus1 It is both theoretical and practical I'd say. Put-call parity isn't used to determine the price of calls and puts, (that would be option pricing models like Black Scholes and Binomial Option Pricing Model). It is more so used to point out a relationship that must hold true or arbitrage profits can be earned immediately
💾 Purchase the file created in this video here: ryanoconnellfinance.com/product/black-scholes-put-call-parity-calculator/
🎓 Tutor With Me: 1-On-1 Video Call Sessions Available
► Join me for personalized finance tutoring tailored to your goals: ryanoconnellfinance.com/finance-tutoring/
This channel is golden lol, just discovered you will your videos on markowitz's portffolio frontier and this stuff on derivaties is great, thanks man
Welcome aboard! I'm glad to hear you enjoyed them, it's my pleasure
Thanks man
I was struggling with this for 2 hours
Love the content you put out. I was wondering if you would possibly do one on the Bjerksund-Stensland Option Pricing Model? Very interested in how that would be performed on Excel.
Thanks for the suggestion and I can look into this topic in the future!
you video is awesome cuz my professor keep using algebra instead of real number which is easier to conceptualise
Thank you! Sometimes real world examples really help to get a concept down
Thank you from Russia!
Thank you too!
Best channel on youtub
Thank you man, this may be the best feedback I've gotten
Howdy man ¡ Would you considered making a video regarding the SBM (FRTB SA) ? I think it would be quite interesting if you could explain how to calculate delta vega and curvature of the trading book. Thank you in advance
Hey Pablo, I can look into this topic in the future!
good! comment before watching
Hope you enjoyed it!
Awesome video. One questions, in the second half of the video, why do you use the strike price to calculate the cash payoff instead of the discounted strike price? This deviates from the original put call parity formula so I did not follow this. Thanks in advance.
come back to revise for my final next month!
Good luck on the test!
Why did you calculate the PV of the Strike Price that way? Why not use the traditional way of calculating the PV in excel?
hi sir！ my professor said the Ke^-rt is a future. But it is a bond in this video. I am confused..
K*e^-rt is just a zero coupon bond discounted at the risk free rate (r) for a certain amount of time (t), where K is equal to the notional value of the bond. It assumes continuous compounding of interest (that is where e comes in)
@@RyanOConnellCFA thanks ryan!
@@tsunningwah3471 My pleasure!
In this scenario, since the calls value is more than the put, if you were to long Port A and short Port B there is theta decay risk, not zero risk.
is it true ? can you explain
@ryan how we can enter 1 week expiration time
For time (t) you can enter =7/365
7 being the number of days in a week and 365 being the number of days in a year
hello! but in reality, does this mispricing ever occur? and how often?
Any mispricing like this shouldn't exist for more than a fraction of a second before high frequency traders secure the arbitrage and force put-call pricing back into parity
I'm not an expert, but I imagine it will occur whenever someone does a price-changing purchase without a corresponding parity purchase on the other side (i.e. inefficient execution of purchasing a particular risk exposure).
@@RyanOConnellCFA thank you! so, it's a purely theoretical thingy used to derive call price from put price and vice versa?
@@bp56789 cheers matey
@@victoricus1 It is both theoretical and practical I'd say. Put-call parity isn't used to determine the price of calls and puts, (that would be option pricing models like Black Scholes and Binomial Option Pricing Model). It is more so used to point out a relationship that must hold true or arbitrage profits can be earned immediately