Book Image

F# for Quantitative Finance

By : Johan Astborg
Book Image

F# for Quantitative Finance

By: Johan Astborg

Overview of this book

F# is a functional programming language that allows you to write simple code for complex problems. Currently, it is most commonly used in the financial sector. Quantitative finance makes heavy use of mathematics to model various parts of finance in the real world. If you are interested in using F# for your day-to-day work or research in quantitative finance, this book is a must-have.This book will cover everything you need to know about using functional programming for quantitative finance. Using a functional programming language will enable you to concentrate more on the problem itself rather than implementation details. Tutorials and snippets are summarized into an automated trading system throughout the book.This book will introduce you to F#, using Visual Studio, and provide examples with functional programming and finance combined. The book also covers topics such as downloading, visualizing and calculating statistics from data. F# is a first class programming language for the financial domain.
Table of Contents (17 chapters)
F# for Quantitative Finance
Credits
About the Author
About the Reviewers
www.PacktPub.com
Preface
Index

Trading the volatility


Trading volatility is like trading most other assets, except that volatility can't be traded explicitly. Volatility is traded implicitly using, for example, options, futures, and the VIX index. Because volatility is an intrinsic value of the assets, it can't be traded directly. To be able to trade volatility, either a hedge position using a derivative and its underlying asset or an option position is initiated.

One often divides volatility trading into two categories: directional trading and relative value. Directional trading in volatility means we trade in the direction of the volatility. If the volatility is high, we may initiate a short trade in volatility. Relative value means we initiate two trades, where, for example, we go long in a call and short in another call. The first call may be under-valued in terms of volatility and the other may be slightly over-priced. The two related assets are then supposed to mean revert, and the profit is to be monetized.

In this...