Maximum subarray problem - Revision history

en>David Eppstein: Reverted edits by 140.180.128.200 (talk) to last version by 173.36.240.175

2015-01-08T05:02:49Z

Reverted edits by 140.180.128.200 (talk) to last version by 173.36.240.175

← Older revision		Revision as of 07:02, 8 January 2015
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	~~{{noreferences\|date=April 2010}}~~		I would like to introduce myself to you, I am Andrew and my spouse doesn't like it at all. For years he's been residing in Alaska and he doesn't plan on changing it. Credit authorising is how he tends to make money. To climb is some thing I really enjoy doing.<br><br>Also visit my web page :: free psychic readings ([http://black7.mireene.com/aqw/5741 black7.mireene.com])
	'''~~Net volatility''' refers~~ to ~~the [[volatility (finance)\|volatility]] implied by the price of an [[option spread]] trade involving two or more options~~. ~~Essentially, it~~ is ~~the volatility at which the theoretical value of the spread trade matches the price quoted in the market, or, in other words, the [[implied volatility]] of the spread~~.

	~~==Formula==~~

	~~The net volatility for a two-legged spread (with one long leg, and one short) can be estimated, to a first order approximation, by the formula:~~
	:<~~math~~>~~\sigma_N=\frac{\nu_L \sigma_L - \nu_S \sigma_S}{\nu_L - \nu_S}\,~~<~~/math~~>

	~~where~~

	:~~<math>\sigma_N</math> is the net volatility for the spread~~
	:~~<math>\sigma_L</math> and <math>\nu_L</math> are the~~ [~~[implied volatility]] and [[Greeks (finance)\|vega]] for the long leg~~
	:~~<math>\sigma_S<~~/~~math> and <math>\nu_S</math> are the implied volatility and vega for the short leg~~

	~~==Example==~~

	~~It is now mid-April 2007, and you are considering going long a Sep07~~/~~May07 100 call spread, i~~.e. buy the Sep 100 call and sell the May 100 call. The Sep 100 call is offered at a 14.1% implied volatility and the May 100 call is bid at a 18.3% implied volatility. The vega of the Sep 100 call is 4.3 and the vega of the May 100 call is 2.3. Using the formula above, the net volatility of the spread is:

	~~::<math>\frac{14.1%\cdot4.3-18.3%\cdot2.3}{4.3-2.3}=9.27%\,<~~/~~math>~~

	~~==Interpretation==~~

	In the example above, going short a May 100 call and long a Sep 100 call results in a synthetic ''forward'' option - i.e. an option struck at 100 that spans the period from May to September expirations. To see this, consider that the two options essentially offset each other from today until the expiration of the short May option.

	~~Thus, the net volatility calculated above is, in fact, the implied volatility of this synthetic forward option~~. While it may seem counter-intuitive that one can create a synthetic option whose implied volatility is lower than the implied volatilities of its components, consider that the first implied volatility, 18.1%, corresponds to the period from today to May expiration, while the second implied volatility, 14.3% corresponds to the period from today to September expiration. Therefore, the implied volatility for the period May to September must be less than 14.3% to compensate for the higher implied volatility during the period to May.

	In practice, one sees this type of situation often when the short leg is being bid up for a specific reason. For instance, the near option may include an upcoming event, such as an earnings announcement, that will, in all probability, cause the underlier price to move. After the event has passed, the market may expect the underlier to be relatively stable which results in a lower implied volatility for the subsequent period.

	~~==See also==~~

	*[[Implied volatility]]
	*[[Volatility arbitrage]]
	*[[Option spread]]

	~~{{Derivatives market}}~~

	~~[[Category:Options (finance~~)]]
	~~[[Category:Derivatives (finance)]]~~

en>A3 nm: see also, subset sum

2014-01-08T13:35:31Z

see also, subset sum

← Older revision		Revision as of 15:35, 8 January 2014
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	The ~~individual who wrote~~ the ~~article~~ is ~~called Jayson Hirano~~ and ~~he completely digs that title~~. ~~For years he's been living in Alaska~~ and ~~he doesn't strategy on altering it~~. ~~Invoicing~~ is ~~my occupation~~. ~~To play lacross~~ is ~~something I truly appreciate performing~~.<br><br>~~My weblog~~: [~~http~~:~~//kpupf.com/xe/talk/735373 free online tarot card readings~~]		{{noreferences\|date=April 2010}}
			'''Net volatility''' refers to the [[volatility (finance)\|volatility]] implied by the price of an [[option spread]] trade involving two or more options. Essentially, it is the volatility at which the theoretical value of the spread trade matches the price quoted in the market, or, in other words, the [[implied volatility]] of the spread.

			==Formula==

			The net volatility for a two-legged spread (with one long leg, and one short) can be estimated, to a first order approximation, by the formula:
			:<math>\sigma_N=\frac{\nu_L \sigma_L - \nu_S \sigma_S}{\nu_L - \nu_S}\,</math>

			where

			:<math>\sigma_N</math> is the net volatility for the spread
			:<math>\sigma_L</math> and <math>\nu_L</math> are the [[implied volatility]] and [[Greeks (finance)\|vega]] for the long leg
			:<math>\sigma_S</math> and <math>\nu_S</math> are the implied volatility and vega for the short leg

			==Example==

			It is now mid-April 2007, and you are considering going long a Sep07/May07 100 call spread, i.e. buy the Sep 100 call and sell the May 100 call. The Sep 100 call is offered at a 14.1% implied volatility and the May 100 call is bid at a 18.3% implied volatility. The vega of the Sep 100 call is 4.3 and the vega of the May 100 call is 2.3. Using the formula above, the net volatility of the spread is:

			::<math>\frac{14.1%\cdot4.3-18.3%\cdot2.3}{4.3-2.3}=9.27%\,</math>

			==Interpretation==

			In the example above, going short a May 100 call and long a Sep 100 call results in a synthetic ''forward'' option - i.e. an option struck at 100 that spans the period from May to September expirations. To see this, consider that the two options essentially offset each other from today until the expiration of the short May option.

			Thus, the net volatility calculated above is, in fact, the implied volatility of this synthetic forward option. While it may seem counter-intuitive that one can create a synthetic option whose implied volatility is lower than the implied volatilities of its components, consider that the first implied volatility, 18.1%, corresponds to the period from today to May expiration, while the second implied volatility, 14.3% corresponds to the period from today to September expiration. Therefore, the implied volatility for the period May to September must be less than 14.3% to compensate for the higher implied volatility during the period to May.

			In practice, one sees this type of situation often when the short leg is being bid up for a specific reason. For instance, the near option may include an upcoming event, such as an earnings announcement, that will, in all probability, cause the underlier price to move. After the event has passed, the market may expect the underlier to be relatively stable which results in a lower implied volatility for the subsequent period.

			==See also==

			*[[Implied volatility]]
			*[[Volatility arbitrage]]
			*[[Option spread]]

			{{Derivatives market}}

			[[Category:Options (finance)]]
			[[Category:Derivatives (finance)]]

en>David Eppstein: Undid revision 509699314 by DrMorcos (talk) does too: max_subarray([-2, 1, -3, 4, -1, 2, 1, -5, 4]) returns 6, correctly. Advantage of Python over pseudocode is you can test it.

2012-08-29T02:42:38Z

Undid revision 509699314 by DrMorcos (talk) does too: max_subarray([-2, 1, -3, 4, -1, 2, 1, -5, 4]) returns 6, correctly. Advantage of Python over pseudocode is you can test it.

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