Exploring the future of financial data architecture: AI-native financial data foundation, large-scale financial data processing, and enterprise data quality & governance.
Tag: Derivatives
In the previous blog, I manually crafted the Python code for pricing CDS without relying on third-party quant libraries. While this approach was useful for understanding the underlying algorithm, in practice, it's preferable to use a mature, validated library for standardisation when available. In this blog post, I will revisit the CDS pricing exercise using … Continue reading Pricing Credit Default Swap with QuantLib
Some Basics of Credit Default Swap (CDS) A Credit Default Swap is a credit derivative instrument that functions as a form of insurance, where one party pays a series of premiums to another party in exchange for protection against the risk of default by the issuer of the underlying debt. Parties Involved: Protection Buyer - Owns … Continue reading Pricing Credit Default Swaps
A swaption is an option on an interest rate swap. As previously discussed, an interest rate swap involves two parties: the fixed-rate payer (who receives the floating rate) and the fixed-rate receiver (who pays the floating rate). A swaption grants the holder the right, but not the obligation, to enter into a swap contract as … Continue reading Swaption Valuation
Interest rate options are options based on interest rates, where the underlying asset is a reference interest rate, typically in the form of a Forward Rate Agreement (FRA). For instance, an interest rate call option on a 3-month MRR (market reference rate) with 9 months to expiration would have a 3-month FRA rate expiring in … Continue reading Interest Rate Options Valuation
In the last blog post, we explored the Black-Scholes-Merton model and learned that it is the industry standard for pricing option contracts. However, the BSM model is designed for options on stocks and similar spot market assets, and it is not directly applicable for pricing futures options contracts, mainly due to the following differences between … Continue reading Futures Options Pricing with Black Model
In the previous blog post, we saw that the binomial model closely approximates option prices as the number of periods increases. The binomial model is known for its flexibility, intuitiveness, and fewer assumptions. So, why do we still need the Black-Scholes-Merton (BSM) model for option pricing, especially given its restrictive assumptions? One of the main … Continue reading Black-Scholes-Merton (BSM) Model
In this blog series, I will aim to code the formulas and model algorithms covered in the CFA Level 2 program using Python and DolphinDB. Each topic will begin with a brief explanation of the formulas or algorithms, followed by their implementations in Python and DolphinDB. A currency swap is a financial agreement where two … Continue reading Currency Swap Pricing and Valuation
In this blog series, I will aim to code the formulas and model algorithms covered in the CFA Level 2 program using Python and DolphinDB. Each topic will begin with a brief explanation of the formulas or algorithms, followed by their implementations in Python and DolphinDB. An Interest Rate Swap (IRS) is a financial derivative … Continue reading Interest Rate Swap Pricing and Valuation
In this blog series, I will aim to code the formulas and model algorithms covered in the CFA Level 2 program using Python and DolphinDB. Each topic will begin with a brief explanation of the formulas or algorithms, followed by their implementations in Python and DolphinDB. This blog post focuses on pricing and valuing forward … Continue reading FRA Pricing & Valuation
This blog post focuses on pricing and valuing forward contracts for underlying assets with or without carry costs and benefits, as well as pricing stock index forward contracts. In this blog series, I will aim to code the formulas and model algorithms covered in the CFA Level 2 program using Python and DolphinDB. Each topic … Continue reading Forward Contract Pricing & Valuation
Data Ninjago (Financial Data Architecture) 
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