Product ABC (3):Vol Skew

What is Vol Skew: Volatility skew refers to the inequality of the implied volatility of out-of-the-money calls and puts What Causes Downside Volatility Skew? In most equities, downside volatility skew is present. Why? Well, most people own stocks in their investment portfolios. There are two very simple and common ways to use options in a … Continue reading Product ABC (3):Vol Skew

Product ABC (2): Contango vs. Normal Backwardation

Contango and Normal Backwardation A futures market is normal if futures prices are higher at longer maturities and inverted if futures prices are lower at distant maturities. This is where the concept gets a little tricky, so we’ll start with two key ideas: As we approach contract maturity (we might be long or short the futures contract, it … Continue reading Product ABC (2): Contango vs. Normal Backwardation

Product ABC (1): Range Accrual

When reading an article about the financial crisis during the 2007-2008, there is one special product draws my attention – Range Accrual. I may take this chance to deeply look into this product and analyze this interesting product Payoff description index(i) is the value of the index at the ith observation date N is the total number … Continue reading Product ABC (1): Range Accrual