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Constant Elasticity Variance (CEV) model

Discussion in 'Options' started by Teddy, Jun 21, 2016.

  1. Teddy

    Teddy Well-Known Member

    Has anyone trading using the CEV model and how does this compared with Black Scholes Model?
     
  2. stevegee58

    stevegee58 Well-Known Member

  3. Teddy

    Teddy Well-Known Member

    I've seen that already.
    The reason that I ask is because it did not seem to ever matter for any of my trades to be significant. The excepting for XOM which it never made any sense other than with CEV. My XOM would have a +ve delta and when it went up I loss money. When I had a -ve delta, it made money when it went up. The vega was -ve, but it just wouldn't do that daily when you watch it. When I used the CEV model, I was able to see that the difference was significant. What was -ve delta on Black Scholes was a +ve delta on CEV.

    I just don't know if there is other experiences that folks have noticed, say on the indices, and whether the difference was meaningful or necessary.
     

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