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some problems with the T-0...

Discussion in 'OptionNET Explorer' started by Carsten5000, Mar 3, 2017.

  1. Carsten5000

    Carsten5000 Guest

    OptionNetExplorer.png hi,
    im new to the OpntioNetExplorer. Please look at the atteched picture, it shows the problem with the T-0 line. When the "Volatility Surface" is checked (like in the picture) the T-0 Line sometimes in the backtest sag down. Now my Question: is the Error produced by myself (false configuration) or is it a problem with the old data (Backtest in 2007) or is it a Problem by ONE?

    kindly regards

    carsten
    (sorry for the bad english... the school is long time ago...)
     
    Last edited by a moderator: Mar 3, 2017
  2. Teddy

    Teddy Well-Known Member

    This is happening because of the shorter maturity period.
    You have to remember that the Black Scholes equation is a model. That being the case, erratic volatility at short maturities combined with OTM options result in large volatility. The problem is that there are 1 ITM, 2 ATM and one OTM options which makes the surface not that smooth. Overall, my guess is that with 14 days to expiring that is causing estimation errors.

    Take a look at the numbers you get at the bottom of the graph. You have Greeks that are all zeros beyond 800 and Funny Greeks below 740
     
    Carsten5000 likes this.
  3. Carsten5000

    Carsten5000 Guest

    @ Teddy, thank you for the explanation.
     
  4. Alice Young

    Alice Young New Member

    I’d say try unchecking the Vol Surface before 2010, it only works off their intra-day data at the moment.
     
    Carsten5000 likes this.

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