h*******a
发帖数: 41 | 1 A straddle = long a put and a call at the same time. We know that when
interest rate goes up, the value of future cash flow decreases, therefore
the value of a call goes up, while that of a put goes down.
Question: does the value of a straddle goes up or down when interest rate
goes up? Give intuitive arguments instead of Black Schole formula. |
z****u
发帖数: 185 | 2 "straddle = long a put and a call at the same time. We know that when
interest rate goes up, the value of future cash flow decreases, therefore
the value of a call goes up, while that of a put goes down. "
can you elaborate why the value of call goes up but value of put down? |
l*****i
发帖数: 3929 | 3 Thank about a single call option. It sort of makes you "long" the underlying
. On the other hand a call is normally much cheaper than the underlying. So
if the interest rate is very high, people prefer buying the call instead of
the underlying itself. Intuitively that's why calls have positive rho.
Similar analysis applies to put options.
【在 z****u 的大作中提到】
: "straddle = long a put and a call at the same time. We know that when
: interest rate goes up, the value of future cash flow decreases, therefore
: the value of a call goes up, while that of a put goes down. "
: can you elaborate why the value of call goes up but value of put down?
|
l*****i
发帖数: 3929 | 4 I think the final answer will depend on if the straddle is ITM/ATM/OTM.
Normally in the money options change its value more than its counter
party. For example, if the underlying is at 100 and we are talking about the
50 straddle. Obviously the call is in the money and the put is out of the m
oney. When the interest rate goes up, the call option gains more value than
what the put option loses. Hence the straddle will be more expensive.
【在 h*******a 的大作中提到】
: A straddle = long a put and a call at the same time. We know that when
: interest rate goes up, the value of future cash flow decreases, therefore
: the value of a call goes up, while that of a put goes down.
: Question: does the value of a straddle goes up or down when interest rate
: goes up? Give intuitive arguments instead of Black Schole formula.
|
J*****n
发帖数: 4859 | 5 long straddle, you get negative convexity. So when interest rate goes up,
you get fucked. |
J*****n
发帖数: 4859 | 6
the
m
than
you said it. But the goal here is to make duration neutral and check the
sign of convexity.
【在 l*****i 的大作中提到】
: I think the final answer will depend on if the straddle is ITM/ATM/OTM.
: Normally in the money options change its value more than its counter
: party. For example, if the underlying is at 100 and we are talking about the
: 50 straddle. Obviously the call is in the money and the put is out of the m
: oney. When the interest rate goes up, the call option gains more value than
: what the put option loses. Hence the straddle will be more expensive.
|
L****a
发帖数: 572 | 7 In a very short period of time, option price behavior should be the similar to
the price behavior of a portfolio of stock. So 1 option call contract should
be equivalent to (long x stock + short some bond),
and 1 put contract should be equivalent to (short y stock + long some bond) . x,y
is determined by delta. and amount of bond long/short is determined by x,y
So, if call is ATM, x=y, the price of straddle does not change, if interest
rate increase.
If call is ITM, x>y, straddle price increase |
f****e
发帖数: 590 | 8 有点意思
请问这里x y是delta么？
为啥ATM 的时候 x=y？
similar to
should
) . x,y
y
interest
【在 L****a 的大作中提到】
: In a very short period of time, option price behavior should be the similar to
: the price behavior of a portfolio of stock. So 1 option call contract should
: be equivalent to (long x stock + short some bond),
: and 1 put contract should be equivalent to (short y stock + long some bond) . x,y
: is determined by delta. and amount of bond long/short is determined by x,y
: So, if call is ATM, x=y, the price of straddle does not change, if interest
: rate increase.
: If call is ITM, x>y, straddle price increase
|
a***d
发帖数: 73 | 9 Will go up, no matter I/O/A.
Pay attention: Give intuitive arguments.
In general, in short term, interest rate goes up, the volatility of the
market will go up, trading straddle just bid on volatility.In mid term or
long term, who knows what is going to happen, too many uncertainties. |
l*****i
发帖数: 3929 | 10 这个太牛了，兄台感性思维之强大令人观止，只可惜不懂装懂，结论错误
【在 a***d 的大作中提到】
: Will go up, no matter I/O/A.
: Pay attention: Give intuitive arguments.
: In general, in short term, interest rate goes up, the volatility of the
: market will go up, trading straddle just bid on volatility.In mid term or
: long term, who knows what is going to happen, too many uncertainties.
|
|
|
l*****i
发帖数: 3929 | 11 看看这个
【在 a***d 的大作中提到】
: Will go up, no matter I/O/A.
: Pay attention: Give intuitive arguments.
: In general, in short term, interest rate goes up, the volatility of the
: market will go up, trading straddle just bid on volatility.In mid term or
: long term, who knows what is going to happen, too many uncertainties.
|
L****a
发帖数: 572 | 12 Yes. If call and put is ATM, the absolute value of delta is the same.
【在 f****e 的大作中提到】
: 有点意思
: 请问这里x y是delta么？
: 为啥ATM 的时候 x=y？
:
: similar to
: should
: ) . x,y
: y
: interest
|
J****g
发帖数: 103 | 13 赞determined by delta.
similar to
should
) . x,y
y
interest
【在 L****a 的大作中提到】
: In a very short period of time, option price behavior should be the similar to
: the price behavior of a portfolio of stock. So 1 option call contract should
: be equivalent to (long x stock + short some bond),
: and 1 put contract should be equivalent to (short y stock + long some bond) . x,y
: is determined by delta. and amount of bond long/short is determined by x,y
: So, if call is ATM, x=y, the price of straddle does not change, if interest
: rate increase.
: If call is ITM, x>y, straddle price increase
|
a***d
发帖数: 73 | 14 Don't understand. Can explain more? I really want to see how Quants think
about this problem. BTW, even if interest rate goes down, I also will say straddle value will go up.
【在 l*****i 的大作中提到】
: 看看这个
|
a***d
发帖数: 73 | 15 Are you talking about bond option or other options?
the
m
than
【在 l*****i 的大作中提到】
: I think the final answer will depend on if the straddle is ITM/ATM/OTM.
: Normally in the money options change its value more than its counter
: party. For example, if the underlying is at 100 and we are talking about the
: 50 straddle. Obviously the call is in the money and the put is out of the m
: oney. When the interest rate goes up, the call option gains more value than
: what the put option loses. Hence the straddle will be more expensive.
|
l*****i
发帖数: 3929 | 16 I'm talking about European options on almost everything. Please take a
closer look at my graph.
the
【在 a***d 的大作中提到】
: Are you talking about bond option or other options?
:
: the
: m
: than
|
a***d
发帖数: 73 | 17 I don't understand why the call value of the bond options go up when
interest rate goes up. Can u explain that? I also don't understand why those
smiles can explain your theory. |
l*****i
发帖数: 3929 | 18 Those graphs are the theoretical values of straddles as a function of strike
s, for different values of interest rate.
those
【在 a***d 的大作中提到】
: I don't understand why the call value of the bond options go up when
: interest rate goes up. Can u explain that? I also don't understand why those
: smiles can explain your theory.
|
a***d
发帖数: 73 | 19 Good point, the theoretical values. Everyone can get that kind of graphs.
1) your volatility factor is fixed in your chart, so meaningless.
2) short term period, volatility has much bigger impact than time value.
So intuitively, I just guess what is going to happen if interest rate
CHANGES, in most of cases, vol goes up(May go down under certain cases, depends whether it is priced in or not).
strike
【在 l*****i 的大作中提到】
: Those graphs are the theoretical values of straddles as a function of strike
: s, for different values of interest rate.
:
: those
|
p*****k
发帖数: 318 | 20 thought this is just a question about the greek: Rho of a straddle. dont have much intuition about rho outside the BS world. but in a BS world, it's not related to either delta or the volatility.
as longhei showed, rho of an european option is proportional to the risk-neutral probability of this option finishing ITM (note call has positive rho while negative for put; also the probabilities of a call and a put with the same strike add up to 1).
when the strike is S*exp(r-sigma^2/2), the prob. i |
|
|
l*****i
发帖数: 3929 | 21 呵呵，你觉得楼主的面试问题会涉及到volatility随利率的变化？我是就事论事，假设
短时间内volatility不变。你要是有兴趣搞复杂的，你自己上吧
depends whether it is priced in or not).
【在 a***d 的大作中提到】
: Good point, the theoretical values. Everyone can get that kind of graphs.
: 1) your volatility factor is fixed in your chart, so meaningless.
: 2) short term period, volatility has much bigger impact than time value.
: So intuitively, I just guess what is going to happen if interest rate
: CHANGES, in most of cases, vol goes up(May go down under certain cases, depends whether it is priced in or not).
:
: strike
|
f****e
发帖数: 590 | 22 能解释一下 直观上
call 和 put 对应得long 和short bond的数量和delta 的关系吗？
similar to
should
) . x,y
y
interest
【在 L****a 的大作中提到】
: In a very short period of time, option price behavior should be the similar to
: the price behavior of a portfolio of stock. So 1 option call contract should
: be equivalent to (long x stock + short some bond),
: and 1 put contract should be equivalent to (short y stock + long some bond) . x,y
: is determined by delta. and amount of bond long/short is determined by x,y
: So, if call is ATM, x=y, the price of straddle does not change, if interest
: rate increase.
: If call is ITM, x>y, straddle price increase
|
L****a
发帖数: 572 | 23 My original thinking was that the bond short/long = x*(stock price) and
y*(stock price). But this may not be exactly correct. Because we didn't
consider we also need to borrow money to buy option. The correct
short-term arbitrage should be
long option + short some bond = long stock + short some bond.
If we don't consider the short bond in the left side. Then the straddle
price does not change if interest rate up. But that is not exactly
correct, as described above. It's also interesting to see f
【在 f****e 的大作中提到】
: 能解释一下 直观上
: call 和 put 对应得long 和short bond的数量和delta 的关系吗？
:
: similar to
: should
: ) . x,y
: y
: interest
|
T*******t
发帖数: 9274 | 24 what ???!!!
【在 J*****n 的大作中提到】
: long straddle, you get negative convexity. So when interest rate goes up,
: you get fucked.
|
x****c
发帖数: 25662 | 25 你也混这啊
【在 T*******t 的大作中提到】
: what ???!!!
|
T*******t
发帖数: 9274 | 26 偶尔来看看，谈不上混了
【在 x****c 的大作中提到】
: 你也混这啊
|
d*j
发帖数: 13780 | 27 高盛的？
答案到底是什么？
呵呵
【在 h*******a 的大作中提到】
: A straddle = long a put and a call at the same time. We know that when
: interest rate goes up, the value of future cash flow decreases, therefore
: the value of a call goes up, while that of a put goes down.
: Question: does the value of a straddle goes up or down when interest rate
: goes up? Give intuitive arguments instead of Black Schole formula.
|
g*****u
发帖数: 14294 | 28 Intuition怎么会需要这么多字来写。
按我的常识来讲，when interest rate goes up, traddle price will presumably go
down. 进一步讲，不是升息的那个货币cash, 有什么asset不是贬值呢？ |
h*******a
发帖数: 41 | 29 我也不知道，不过觉得longhei和pcasnik说得挺有道理
【在 d*j 的大作中提到】
: 高盛的？
: 答案到底是什么？
: 呵呵
|
d*j
发帖数: 13780 | 30 好像是和 BS formula 那个 closed form 有关的
【在 h*******a 的大作中提到】
: 我也不知道，不过觉得longhei和pcasnik说得挺有道理
|
|
|
p******i
发帖数: 1358 | 31 let me try to give some intuitive explanation
assume S=100, we have three straddles K=10 K=100 K=1000
for K=100 it is less obvious
but for K=10, one deep in the money call and deep out of the money put,
essentially it is a damn call because the put is worthless no matter what
for K=1000 straddle, it is actually a put |
d********e
发帖数: 25 | 32 Another intuitive approach:
A straddle means that you have a probability to long the asset (p1), or to
short the asset (p2) at a given price in the future (p1+p2=1). If the
interest rate goes up, the asset in the future will worth less now. So if p1
>p2, the straddle worth less, if p1 |
