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…
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Why inflation breakevens may not reflect ‘true’ of inflation – part 3
Why inflation breakevens may not reflect ‘true’ of inflation – part 3 02 May 2023 Inflation-linked bonds are regarded as being relatively illiquid. But what does this mean? One nice explanation comes from Barclays Bank “The reason…
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Why inflation breakevens may not reflect ‘true’ inflation – part 2
This second post will consider the issue of par floors and how they impact real yields. Some sovereign linker markets issue bonds that protect the investor against deflation. Examples include the USA but not the…
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Why inflation breakevens may not reflect ‘true’ inflation – Part 1
This is the first of a couple of blogs that look at why inflation breakevens may not be a measure of ‘true’ inflation. One of the most useful relationships in finance is the Fisher equation. …
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Commodity basket options – Understanding commodity correlations
Commodity solutions are often structured using correlation-dependent options. Let’s say a car producer wishes to hedge their copper and aluminium costs using a single option. They enter into a 3-month equally weighted basket option. With…
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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…
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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…
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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:…
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The Cat and the Banker
Can highly recommend that pople check out the following book “The Cat and the Banker”. It is written by an ex-colleague Nadir Mehadji who has come up with a creative way of explaining a series…
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