- 1x2 ratio spreads
- see also butterflies; ratio spreads
- 25 and 10 delta puts strategy
- 36 South
- 60/40 stocks/bonds portfolio mix
- 665 puts
- academic ideas, critique
- active fund managers
- see also fund managers
- advance/decline ratios
- ‘aftershock’ hedges, butterflies
- ‘air pocket’ declines
- airplane ticket trade
- alpha
- definition
- ambulance-style strategies
- American options
- Animal Farm (Orwell)
- ‘Anti-Fragile’ trades
- Apple
- arbitrage
- arrogance dangers
- Asness, Cliff
- asset allocations
- asset managers
- astronomy
- ‘asymptotics’
- at-the-money options (ATMs)
- definition
- Australian Dollar (AUD)
- Austrian capital markets
- autoregressive models
- see also GARCH. . .
- back-tests
- cautionary note
- backwardation
- see also futures; long-dated contracts; short-dated contracts
- definition
- bad news
- ‘bad’ options
- balance sheets, central banks
- bandwagons
- bankruptcies
- see also liquidations
- banks
- see also central. . .; LIBOR; loans
- collateral
- credit supply increases
- crises
- critique
- failures
- ‘great multiplier’ status
- multiplier effect
- profits
- runs
- barbell approaches
- Barclays CTA indices
- BARRA model
- barrier options
- basis points
- ‘Batman’ trades
- see also gamma; ratio spreads
- bear markets
- claws of the bear
- put options
- bear strategies
- behavioural finance
- see also crowding problems
- ‘being able to sleep at night’ principle
- ‘bell curves’
- see also normal distributions
- Berlin Wall
- beta
- see also stock indices
- definition
- biases
- bid ask spreads
- binary options
- binary VIX-derived risk index
- binomial model
- Black 76 pricing formula
- Black Monday fluctuations on October 19 1987
- black swans
- see also extreme events
- Black-Derman-Toy model
- Black-Litterman model of 1990
- Black-Scholes model
- see also implied volatility
- assumptions
- background
- definition
- historical background
- parameters
- Black-Scholes-Merton assumptions
- bleed
- see also theta (time decay)
- definition
- bonds
- see also corporate. . .; government. . .; high yield. . .
- futures
- hedging sovereign bond risks
- interest rates
- MOVE
- over-priced considerations
- premia
- stock return contrasts
- yield curves
- bonuses
- Brazil
- breakouts, definition
- bubbles
- see also bull markets; speculators
- bull markets
- see also bubbles
- butterflies
- see also fixed-width. . .; iron. . .; put flies; ratio spreads
- definition
- ‘buy high and sell higher’ mantra
- ‘buy low and sell high’ mantra
- ‘buy-write’ strategy see covered call writing
- buying time, weekly options
- calendar spreads
- call options
- building blocks
- bull markets
- definition
- put-call parity
- spread trades
- uses
- VIX options
- call ratio spreads
- call spreads on bond futures
- calm periods, rationalisations
- CAPE ratio
- Capital Asset Pricing Model (CAPM)
- definition
- Carlson, Mark A.
- carry trade strategies see FX carry trade strategies
- cascades, market sell-offs
- cash
- CBOE
- central banks
- see also banks
- balance sheets
- critique
- monetary policy
- quantitative easing (QE)
- rescue packages
- roles
- CFTC
- chameleon Bund skew
- chaos theory
- chasing 1-day moves, trend following
- Chicago Mercantile Exchange (CME)
- China
- Choudhry, M.
- claws of the bear
- collapse point theory
- collateral
- see also equities; real estate
- commercial paper
- commodities
- see also individual commodities
- Commodity Trading Advisors (CTAs)
- common mistakes
- computers, critique
- Conan Doyle, Arthur
- conditional correlation
- see also correlations
- definition
- conditional performance of hedging strategies
- constant maturity bonds, definition
- contagion
- contango
- see also forward curves; futures; long-dated contracts; short-dated contracts
- definition
- continuous return distributions
- contrarian strategies
- convertible bonds
- convexity
- corporate bonds
- see also bonds
- corporate events
- correlations
- see also implied. . .
- black swans
- definitions
- implied volatility skew impacts
- liquidity
- US equity/bond volatilities
- volatility indices
- cost of carry
- cotton
- counter-cyclical approaches
- counterparty credit risk
- covariance matrix
- see also correlations; volatilities
- covered call writing, definition
- CPI inflation
- crashes
- see also crises; ‘Flash Crashes’
- credit cycles
- credit default swaps
- credit derivatives
- credit risk
- credit spreads
- credit supply increases
- crises
- see also crashes; European. . .; extreme events; global financial. . .; market drops; portfolio insurance. . .; systemic risks
- banks
- cascades
- fireflies
- impact curves
- lessons learned
- LIBOR
- mathematical biology analogy
- May 2010
- monetary policy
- negative feedback loops
- panicking investors
- paths
- policy control strategies
- pre-conditions
- preceding down days
- predictions
- quantitative easing (QE)
- reasons
- Sornette’s claim
- summary and conclusion
- ‘crisis alpha’ strategies
- books
- definition
- market timing
- trend following
- cross-sectional study, roll yield
- Crossborder Capital
- crowding problems
- see also behavioural finance
- CTA indices, trend following
- currencies
- AUD/JPY
- CHF/EUR
- CVIX
- EUR/CHF
- EUR/USD
- GBP/USD
- pegs
- USD/JPY
- currency options
- see also FX. . .
- currency risks
- customised trend following
- ‘cutting their losses and letting their profits run’ policies
- CVIX
- data tabulations, critique
- DAX
- defaults
- defensive strategies, trend following
- deflation
- deformable sheets
- deleveraging
- delta
- see also gamma; spot. . .; underlying. . .
- definition
- delta calls
- delta hedging
- see also dynamic aspects of hedging
- critique
- definition
- idealised case
- practical limits
- delta neutrality
- imbalance considerations
- delta puts
- deposits
- Derman, E.
- diffusion-type equations
- see also Black-Scholes model
- direct lending, definition
- discrete price trees
- dispersion, definition
- diversification
- across time
- critique
- dividends, r-d factors
- do Prado paper (2013)
- doomsday bets
- Dow Jones Industrial Average
- ‘dragon kings’ outliers
- drift
- Druckenmiller, Stanley
- duration hedging
- dynamic aspects of hedging
- see also delta hedging
- earnings reports, corporate events
- economic growth
- ‘econophysics’
- emerging markets
- energies
- Enron
- equities
- see also stock. . .;
- equity index options
- equity risk premiums
- Euro (EUR)
- European Central Bank (ECB)
- European Crisis of 2011
- European options
- see also options
- Eurostoxx
- Everest Capital
- ‘every dog has its day’ saying
- exercise, options theory
- ‘extreme event hedging’ books
- extreme events
- see also crises; ‘Flash Crashes’; market drops; random shocks
- holistic approaches
- macro perspectives
- predictions
- probabilities
- random walks
- Sornette’s claim
- summary and conclusion
- failures
- see also crises
- banks
- ‘fair value’ arguments
- losing positions
- Farmer’s Oxford group
- fat tails
- ‘dragon kings’ outliers
- short-dated options
- Fed Funds rate
- Federal Reserve Bank
- fees
- fireflies
- fixed-width put flies
- ‘Flash Crashes’
- see also crises; extreme events
- background
- definition
- summary and conclusion
- flex features
- ‘flight to quality’ scenarios
- floors
- ‘flow’ traders
- forecasts see predictions
- forward curves
- forwards
- see also FX carry trade strategies
- France
- French capital markets
- FTSE 100 index
- fund managers
- see also portfolio managers
- fundamental analysis
- futures
- see also backwardation; contango; interest rate. . .; portfolio insurance; roll yield
- bonds
- definitions
- options on futures
- uses
- versus spot
- futures term structure
- definition
- FX carry trade strategies
- see also currency. . .; forwards
- Gaddis, William, Jr
- gambling tactics
- gamma
- see also delta; short-dated options
- definition
- gap risks
- GARCH type econometric forecast volatility models
- Gaussian distributions see normal distributions
- GBP
- GDP
- gearing
- German Bund
- German capital markets
- Germany
- global financial crisis from 2007
- beta
- causes
- central bank rescue packages
- toxic stocks
- glossary
- gold
- Goldman Sachs
- Gopikrishnan, P.
- government bonds
- ‘gray swan’ hedges, call spreads on bond futures
- Great Depression-type scenarios
- ‘great multiplier’ status, banks
- Greece
- greed/fear vulnerabilities, options
- the Greeks
- see also beta; delta; gamma; rho; theta; vega
- definition
- Greenspan, Alan
- GVIX indices
- hanging-on approaches, losing positions
- Haug, E.G.
- hedge funds
- definition
- failures
- hedging
- see also delta. . .
- common mistakes
- conditional performance of hedging strategies
- costs
- dynamic aspects
- implausible scenarios
- imprecise but effective hedges
- market drops
- negative risk premiums
- over/under-hedging considerations
- overlay strategies
- rationalisations
- risk-regime analysis
- sad truths
- sceptics
- small moves
- ‘sombrero’ strategy
- sovereign bond risks
- ‘square root’ strategy
- strategies
- summary
- time scales
- the wings
- zugzwang chess situation
- hedging options with other options
- Henriksson-Merton model
- heuristic arguments
- ‘high risk’ scenarios
- high volatility
- high yield bonds
- high-frequency finance
- historical volatility
- see also realised. . .; volatilities
- hockey stick payouts
- holistic approaches, extreme events
- ‘hope is not an investment strategy’ philosophies, losing positions
- Hurst exponent
- Hussman, John
- hyper-inflation
- hypothesis tests, model contrasts
- impact curves
- implausible scenarios, hedging
- implied correlation
- implied correlation skew
- implied distributions
- implied volatilities
- see also Black-Scholes model; insurance; options
- ATM implied volatility
- determinants
- long-dated options
- over-priced considerations
- implied volatility indices
- see also CVIX; MOVE; V2X; VIX
- implied volatility skew
- definition
- risky asset dynamics
- implied volatility smiles
- implied volatility surfaces
- implied-historical volatility spreads
- imprecise but effective hedges
- in-the-money options (ITMs)
- incentive structures, hedge funds
- index put spreads
- indirect hedges
- inflation rates
- institutional investors
- see also investors; pension funds
- insurance
- see also hedging; implied volatilities; options
- costs
- over-priced aspects
- portfolio insurance crisis of 1987
- selling philosophies
- summary and conclusions
- interest rate futures
- interest rate options
- interest rate risk
- interest rates
- see also LIBOR; rho
- interpolated implied volatilities
- intrinsic values of options, definition
- intuition
- ‘inverse problem’
- investment clock concepts
- investors
- see also institutional. . .
- perceptions
- IPOs
- iron (centred) flies
- iShares MSCI Brazil ETF
- ‘it looks good at, looks great at, looks absolutely fantastic at 70 and you’re out of business at 60’ saying
- Jacobs, Bruce
- Japan
- Japanese Government Bond (JGB)
- Japanese Yen (JPY)
- Johnson & Johnson
- Journal of Political Economy
- jumps
- Kelly’s criterion
- knock options
- kurtosis of returns
- ladders
- latent risk
- law of large numbers
- lazy sod approaches
- Lefèvre, Edwin
- leg downs
- ‘LEGO’ trend following
- Lehman Brothers
- Leland, O’Brien, Rubinstein portfolio insurance strategy (LOR)
- lessons learned, crises
- Letters to a Young Poet (Rilke)
- leverage
- see also gearing; liquidity
- LIBOR
- ‘line item’ approaches
- liquidations
- liquidity
- loans
- see also banks
- ‘log log’ plots
- long calls strategy
- long gamma strategies
- long options
- long positions
- long puts
- long volatility managers
- see also trend following
- long-dated contracts
- long-dated options
- background
- definition
- implied volatilities
- investment clock concepts
- r-d factors
- underpriced evidence
- uses
- vega
- lookback windows
- losing positions
- ‘fair value’ arguments
- hanging-on approaches
- shorting considerations
- lottery-ticket weekly option approaches
- low volatility
- macro perspectives, extreme events
- MACs see moving average crossover systems
- Malek’s risk index
- Mandelbrot, B.
- margin calls
- marginal risks
- mark-to-market factors
- market capitalisation weights
- market drops
- background
- contrarian strategies
- equity risk premium
- hedging
- index put spreads
- mean reversion
- ‘oversold’ assets
- remarkable second moment
- selling VIX upside
- summary
- Texas-style hedging
- trading reversals
- vicious reversals
- VIX
- market makers
- market risks
- see also systemic risks
- market sell-offs
- see also crises; extreme events; market drops
- cascades
- impact curves
- risk premia
- market timing, ‘crisis alpha’ strategies
- markets
- see also bear. . .; bull. . .; market drops
- CAPE ratio
- definition
- major countries
- risk-on/risk-off phases
- Markowitz portfolio theory
- mathematical biology analogy, ‘Flash Crashes’
- the Matterhorn
- maturity dates
- Maxwell’s equations
- mean reversion
- see also VIX
- definition
- volatilities
- means
- see also normal distributions
- medium-term options
- ‘melt ups’
- mergers
- Merton’s approach to options pricing
- meteorology
- Mexican Peso
- middle strike, butterflies
- model-independent considerations, VIX
- models
- see also individual models
- hypothesis testing contrasts
- standard risk models
- modern portfolio theory
- momentum-based systems see trend following
- monetary policy
- monetised profits
- see also taking profits
- money supply
- money-ness concepts
- see also at-the. . .; in-the. . .; out-of-the. . .
- definition
- Monte Carlo simulations
- mortgage-backed securities (MBSs)
- MOVE
- moving average crossover systems (MACs)
- moving averages
- see also Z scores
- ‘Mrs Watanabe trade’
- MSCI World index
- multi-asset class investors
- multiples
- multiplier effect, banks
- naked puts, ‘sombrero’ performance
- NASDAQ
- natural gas
- negative feedback loops, crises
- negative risk premiums, hedging
- net asset values (NAVs)
- New York and Erie Railroad Company
- Newton’s laws of motion
- Niederhoffer, Victor
- Nikkei
- noise
- non-centred flies
- see also butterflies
- non-diversifiable risks
- see also systemic risks
- normal distributions
- critique
- definition
- NYSE
- oil
- ‘Old Turkey’
- Olsen, Richard
- opportunities, volatilities
- option chains
- options
- see also American. . .; call. . .; currency. . .; equity index. . .; European. . .; Greeks; implied volatilities; insurance; interest rate. . .; put. . .; straddles; strangles; VIX
- 25 and 10 delta puts strategy
- back-tests
- building blocks
- costs
- definitions
- deformable sheets
- greed/fear vulnerabilities
- historical background
- intrinsic values of options
- ladders
- pricing
- ratio spreads
- replication approaches
- short-dated options
- strategies
- structures
- summary
- theory
- uses
- VIX options
- weekly options
- options on bonds
- options on futures
- oranges
- orderly behaviour, liquidations
- out-of-the-money options (OTMs)
- definition
- over-buying options strategies
- over-priced considerations
- overconfidence dangers
- overfitting pitfalls
- overlay strategies, hedging
- ‘oversold’ assets, market drops
- overview of the book
- overwriting strategies
- panicking investors
- Parkinson’s volatility estimate formulae
- partial differential equations
- see also Black-Scholes model
- paths, crises
- pattern recognition techniques
- see also trend following
- payouts
- see also profits
- pegs, currencies
- pension funds
- People’s Bank of China (PBoC)
- performance charts, payout curves
- persistence, risk regimes
- perturbation analysis
- physicists
- piecewise linear functions
- plain vanilla options, definition
- plans
- plausible losses
- plumbers
- policy control strategies, crises
- Ponzi schemes
- portfolio insurance
- see also insurance; risk parity strategies
- definition
- portfolio insurance crisis of 1987
- background
- lessons learned
- portfolio managers
- see also fund managers
- 60/40 stocks/bonds portfolio mix
- Markowitz portfolio theory
- standard risk models
- taking advantage of corrections
- Texas-style hedging
- Portugal
- positive feedback loops
- power law distributions
- Powerball tickets of the hedging world
- prayer
- pre-conditions, crises
- predictions
- background
- summary and conclusion
- premiums, options theory
- price to earnings ratios (P/Es)
- prices of assets, returns
- pricing
- see also Black. . .
- options
- volatilities
- probabilities, extreme events
- profits
- see also payouts
- banks
- insurance
- taking profits
- purchasing power parity (PPP)
- put flies
- put options
- 25 and 10 delta puts strategy
- 665 puts
- bear markets
- building blocks
- definition
- spread trades
- uses
- values
- put ratio spreads
- put spreads
- put-call parity
- quadratic regression
- ‘quant crisis’ of August 2007
- quantitative easing (QE)
- quantitative investment conferences
- r-d factors, long-dated options
- R-squared of the regression
- random shocks
- see also extreme events
- random walks
- extreme events
- randomly weighted portfolios, performance comparisons
- ratio spreads
- see also ‘Batman’ trades; butterflies; ladders
- 1x2 ratio spreads
- 25 and 10 delta puts strategy
- background
- definition
- Powerball tickets of the hedging world
- rational decisions
- ratios
- see also CAPE. . .; Sharpe. . .; spread. . .
- reactive strategies
- real estate
- realised volatility
- see also historical. . .; volatilities
- critique
- rebalancing strategies
- regrets
- regulators
- relative-value hedges
- Reminiscences of a Stock Operator (Lefèvre)
- replication approaches
- repricing of risk
- definition
- repurchase loans (repos)
- returns
- see also alpha
- bonds/stocks contrasts
- CAPE ratio
- inflation rates
- market comparisons
- normal distributions
- prices of assets
- remarkable second moment
- risk-adjusted returns
- sequences
- trend following
- reversals
- rho
- see also interest rates
- definition
- risk
- see also volatilities
- background
- what others are holding
- what others are likely to do
- risk committees
- risk management
- see also hedging
- summary
- traditional risk management limitations
- trend following
- zugzwang chess situation
- risk parity strategies
- see also portfolio insurance
- risk premia, market sell-offs
- risk reversal option structure (RRs)
- risk-adjusted returns
- risk-free rates
- risk-on/risk-off phases, markets
- risk-regime analysis, hedging
- risky assets
- see also stock indices
- definition
- roll down impacts
- roll yield
- see also futures
- cross-sectional study
- definition
- VIX
- rolling options
- rotation strategies
- Rothard’s views on banks
- runs on banks
- Russian capital markets
- S&P 500 (SPX)
- put ratio spreads
- VIX
- sad truths
- ‘safe’ havens
- fallacy
- sceptics, hedging
- schadenfreude
- schizophrenic investors
- Scholes, Myron
- see also Black-Scholes model
- SEC
- second leg down concept
- see also VIX. . .
- background
- selection bias
- selling philosophies, insurance
- settlements, options theory
- Seykota, Ed
- shadow banks
- Shanghai Composite Index
- Sharpe ratio
- see also risk-adjusted returns; volatilities
- definition
- short futures, long calls strategy
- short gamma strategies
- short options
- short positions
- short volatility strategies
- short-dated contracts
- short-dated options
- see also gamma
- background
- definition
- fat tails
- uses
- vega
- short-dated puts
- short-term trades
- signal to noise ratios
- see also trend following
- singularities
- skewness concepts
- skills’ needs
- small moves, hedging
- solipsism strategies
- ‘sombrero’ strategy
- see also ratio spreads
- Sornette’s claim, crises
- Soros, George
- sovereign bonds
- see also bonds
- hedging sovereign bond risks
- soybeans
- speculators
- see also bubbles
- spot prices
- see also underlying. . .
- futures versus spot
- options theory
- spot VIX
- see also VIX
- spread trades
- definition
- ‘square root’ strategy
- standard deviations
- see also normal distributions
- Z scores
- Stanley Group at Boston University
- static options hedges
- ‘stationary’ processes
- statistical methods, critique
- step function, yield curves
- stochastic calculus
- stock indices
- see also equities
- bond return contrasts
- construction methods
- implied correlation skew
- volatility of the components
- weightings
- ‘stocks go up in the long term’ bulls
- ‘stocks for the long run’ crowd
- stop losses
- storage costs
- straddles
- definition
- strangles
- definition
- strikes
- definition
- Strogatz, Steven
- survival tactics
- ‘sweet spot’ lines
- Swiss Franc (CHF)
- Swiss National Bank (SNB)
- Switzerland
- SX5E
- systematic trading strategies
- systemic risks
- see also crises; market risks; non-diversifiable risks
- increases
- systems, critique
- ‘tail risk protection’
- taking profits
- see also monetised profits
- Taleb, N.
- taxes
- term structure of interest rates, trend following
- term structure of volatility
- definition
- Texas-style hedging
- ‘there are old traders and there are bold traders, but there are no old bold traders’ saying
- theta (time decay)
- see also bleed
- background
- definition
- vega/theta ratio
- ‘this time it’s different’ rationalisations
- time decay
- see also theta. . .
- background
- ‘time is on your side’ saying
- ‘time in the market is more important than timing in the market’ saying
- time series, liquidity
- toxic stocks, global financial crisis from 2007
- ‘trading the coastline’
- transaction costs, market drops
- trend following xi
- advantages
- background xi
- chasing 1-day moves
- contrarian strategies
- ‘crisis alpha’ strategies
- critique
- CTA indices
- customised trend following 143
- definition
- direct data analysis
- diversification across time
- dogma
- downside hedges
- high volatility
- ‘LEGO’ trend following
- long options analogy
- market timing
- Niederhoffer argument
- returns
- signal to noise ratios
- summary
- taking advantage of corrections
- term structure of interest rates
- uses
- volatilities
- Treynor-Black model
- ‘true’ returns
- TVIX
- Twain, Mark
- Tyson, Mike
- UCITS funds
- UK
- capital markets
- GBP
- government bonds
- unbounded risk
- underlying prices
- see also spot. . .
- US capital markets, successes
- US Dollar (USD)
- US Federal Reserve Bank
- US M2 money supply
- US Savings and Loans crisis in 1991
- US Treasuries
- USO
- utility functions
- V2X
- Value-at-Risk (VaR)
- values
- see also pricing
- call options
- put options
- variable delta puts
- variance concepts
- variance swaps
- see also VIX
- variance-covariance matrix approach
- vega
- see also volatilities
- definition
- long-dated options
- short-dated options
- vega/theta ratio
- venture capital
- vertical spreads
- see also spread trades
- definition
- Viniar, David
- VIX
- see also volatility indices
- background
- calculation methods
- critique
- definition
- futures term structure
- market drops
- model-independent considerations
- oasis-or-mirage analysis
- risk-regime analysis
- roll yield
- S&P 500 (SPX)
- uses
- VIX 25 delta calls
- VIX futures
- VIX options
- VIX puts, market drops
- volatilities
- see also high. . .; implied. . .; risk. . .; vega
- buying outright volatility
- credit cycles
- definitions
- equity index components
- GARCH type econometric forecast volatility models
- leverage
- mean reversion
- opportunities
- prices of options
- term structure of volatility
- trend following
- volatility cycles, credit cycles
- volatility indices 5
- see also CVIX; MOVE; V2X; VIX
- correlations
- Z scores
- volatility of returns, definition
- volatility smiles
- volatility surfaces
- see also wings
- volga
- see also implied volatility; vega
- definition
- volumes, strategy considerations
- VSTOXX index
- VXX
- see also futures; VIX. . .
- Wall Street Journal
- warrants
- weekly options
- buying time
- contagion effects
- costs
- selective applications of the strategy
- uses
- weightings, stock indices
- West Texas Intermediate (WTI)
- Wilmott, P.
- win/loss ratios, trend following dogma
- the wings
- see also volatility surfaces
- definition
- yield curves
- backwardation
- bond prices
- futures term structure
- shapes
- step function
- yield-enhancing weekly option approaches
- Z scores
- see also moving averages
- definition
- zero coupon bonds
- zugzwang chess situation
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