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Volatility Index (VIX) is a measure of the market’s expectation of volatility over the near term. India VIX is a volatility index derived from the Nifty Index option prices that imply expected market volatility over the next 30 calendar days.

We have seen a bump up in volatility surface and an elevated skew ever since the start of the COVID-19 crash. The spread between the CBOE and India VIX diverged to unforeseen levels.

Volatility Spread: CBOE VIX — INDIA VIX

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Volatility Spread between CBOE VIX and INDIA VIX

This spread recorded its highest level on March 12, 2020 when the Nifty Index tumbled more than 11% in a day. The spread between VIX and India volatility index diverged more than 7.5 …


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Update: The GitHub code

The complexity of over-the-counter structured products warrants numerical methods to price derivatives. I have priced exotics using Excel VBA, Numerix and Bloomberg’s DLIB (BLAN). While these tools addressed the computational complexities of different degrees that many large derivatives desks can handle, such sophisticated tools were not available to many.

The advent of open-source library QuantLib is now changing that equation. And, as it extends to Python, we now have a very powerful computational tool for pricing complex derivatives.

Structure of QuantLib

Price of any derivative, be it a plain-vanilla option or a structured product, depends on the following inputs and QuantLib has effectively designed classes for such inputs as depicted in the following chart. …


Almost 85% of CTA returns can be explained by simple trend following. Momentum or trend following are without a doubt the most popular systematic rule-based strategies used by hedge fund managers.

While moving average models are the ‘hello world’ of trend following strategies, in the era of machine learning, I try to approach it purely from a quantitative perspective where all signals were based on raw price data and its statistical properties.

The strategy is to buy and sell the Indian equity benchmark Nifty Index when the proprietary statistical measure (SM) is above/below a predefined threshold.

Datasets

Nifty futures 1-Min data from August 2010 to August 2019 was used. This data was then further resampled and manipulated to generate trade signals. …

About

Kannan

President — CQF Mumbai Society | Quantitative Equity & Derivatives Specialist | Data Science Enthusiast | CQF alumnus | kannansingaravelu.com

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