Exploring the future of financial data architecture: AI-native financial data foundation, large-scale financial data processing, and financial AI safety & governance
Tag: Derivatives
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
To kick off this blog post, let's start with a quick experiment where we compare option prices derived from the binomial model with increasing periods to those calculated using the Black-Scholes Model (BSM). Here, we run two sets of option pricing calculations. In the first set, we use the multi-period binomial model, calculating the option … Continue reading From Binomial Model to BSM
With the foundational concepts introduced in the previous blog post on the one-period binomial model, along with the path tracing and backward induction covered in the post on the two-period binomial model, we can now move to the multi-period binomial model, which is applicable to real-world scenarios. Once you understand how the one-period and two-period … Continue reading Options Pricing with Multi-period Binomial 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. In the previous blog post on the one-period binomial … Continue reading Options Pricing with Two-Period Binomial 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. From this blog post, we start our journey to … Continue reading Options Pricing with One-Period Binomial 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. Bond futures are financial contracts that obligate the buyer … Continue reading Bond Futures Pricing
Data Ninjago (Financial Data Architecture) 
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