## Trading and Risk

Time and Tide waits for no man…

Was going through a post on Black Scholes and the normal distribution By Cathy O’Neil, a data scientist from mathbabe.
Its surprise to notice that what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).

Quantitative trading and Quantitative risk has big difference in them so let’s try to figure it out.

Markets are not efficient

In quantitative trading, nobody really thinks that “markets are efficient.” That’s kind of ridiculous, since then what would be the point of trying to make money through trading? Continue reading

## Quantitative trading and Quantitative risk

Was going through a post on Black Scholes and the normal distribution By Cathy O’Neil, a data scientist from mathbabe.
Its surprise to notice that what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).

Quantitative trading and Quantitative risk has big difference in them so lets try to figure it out.

Markets are not efficient

In quantitative trading, nobody really thinks that “markets are efficient.” That’s kind of ridiculous, since then what would be the point of trying to make money through trading?

## Swaption Straddle: Back To School

Have you ever thought of purchasing or selling anything which give you both-ways profit?

I know you guys are confused what we actually are talking about but yes, in finance, there is an instrument which gives liberty to the owner to make profit irrespective of the any movement in the current market price and this magic stick is called as “STRADDLE”.

Swaption Straddle is actually a combination of the payer & receiver swaptions. It allows its owner to profit based on how much the price of the underlying security moves, regardless of the direction of price movement.  A straddle is an option trading strategy that involves buying a put and a call at the same strike price. If the underlying goes up, the call is profitable. If it goes down the put is profitable. If there’s little price movement the premiums likely constitute a loss.

## Valuation Of Swaption: Back To School

Continuing with our last post on Swaption, we are here to discuss the “Valuation of Swaption” today. A swaption can be settled in 2 ways as :-

1. Physical settlement:- when an option is exercised to go ahead with the underlying Interest rate swap; and
2. Cash Settlement:- When an option is exercised for the cash value and the market value of the underlying swap changes hands upon exercise.