Option risk management part 3: Delta hedging

Let’s start with a quick recap of a couple of key concepts.  Suppose you have bought a 3 month ATM option on Tesla struck at a price of $1,000.  With an implied volatility of 60%…

Option risk management part 2: Delta

Delta Does anyone remember graph paper? I recall as a 14 year old sitting in a maths class being asked to draw tangents to curves.  I never really got the point until I started looking…

Option risk management part 1

Intrinsic and time value Over the next few posts we will look at some aspects of option valuation and option Greeks.   This first post revisits a couple of valuation principles that are relevant to the…

An A to Z of finance

Following a series of posts on LinkedIn, we have been able to compile a document that comprises of a series of short pieces on various financial topics.   They have been organised alphabetically and can be downloaded…

Understanding inflation breakevens

Inflation breakevens Introduction The Fisher equation is a way of decomposing a nominal yield into three components: It is expressed as: (1 + nominal rate) = (1 + real rate) (1+ inflation expectations) (1+ inflation…

Floating Rate Notes – The Full Monty

Understanding Arsenal’s Floating Rate Note Gerald: All I want to do is get you in a straight bloody line! What do I have to do? Horse: Well it’s the Arsenal offside trap isn’t it? Gerald:…