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A crush spread is a commodity trading strategy in which the trader takes a long position in soybean futures against short positions in soybean meal futures and soybean oil futures to establish a processing margin. [1] Soybeans are processed into two products—meal and oil—through a process called “crushing”, which is where the term stems ...
A long box-spread can be viewed as a long strangle at one pair of strike prices, and , plus a short strangle at the same pair of strike prices. The long strangle contains the two long (buy) options. The short strangle contains the two short (sell) options. A short box-spread can be treated similarly.
In finance, statistical arbitrage (often abbreviated as Stat Arb or StatArb) is a class of short-term financial trading strategies that employ mean reversion models involving broadly diversified portfolios of securities (hundreds to thousands) held for short periods of time (generally seconds to days). These strategies are supported by ...
A short butterfly position will make profit if the future volatility is higher than the implied volatility. A short butterfly options strategy consists of the same options as a long butterfly. However now the middle strike option position is a long position and the upper and lower strike option positions are short.
The formula is quickly proven by reducing the situation to one where we can apply the Black-Scholes formula. First, consider both assets as priced in units of S 2 (this is called 'using S 2 as numeraire'); this means that a unit of the first asset now is worth S 1 /S 2 units of the second asset, and a unit of the second asset is worth 1.
EVA calculation: EVA = net operating profit after taxes – a capital charge [the residual income method] therefore EVA = NOPAT – (c × capital), or alternatively EVA = (r × capital) – (c × capital) so that EVA = (r − c) × capital [the spread method, or excess return method] where r = rate of return, and
Tree returning the OAS (black vs red): the short rate is the top value; the development of the bond value shows pull-to-par clearly . A short-rate model, in the context of interest rate derivatives, is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate, usually written .
Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on ...