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Quantcast – a Risk.net Cutting Edge podcast
Olivier Daviaud 29/04/24
May 3, 2024
JP Morgan quant Olivier Daviaud discusses his alternative to Greeks decomposition, exploring path dependency in P&L and implications for vanilla options. He delves into differences in options trading perspectives between market makers and buy side investors, and explores the link between option performance and volatility premium. Daviaud suggests rethinking P&L attribution for options, advocating for a new approach, and discusses portfolio analysis formula's application across asset classes and future research directions.
20:12
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Quick takeaways
- Olivier Daviaud proposes a new method for calculating P&L components of vanilla options, emphasizing path dependence.
- Distinguishing market makers from buy-side investors in options trading prompts a new approach to performance measurement.
Deep dives
Proposal of a New Approach to Calculating P&L for Vanilla Options
The podcast episode discusses a new paper by Olivier Davio that introduces a radically different method for calculating the components of the P&L for a portfolio of vanilla options. The objective of the paper is to highlight a crucial P&L driver that can significantly impact the performance of options. By focusing on the path dependence of options performance, the paper aims to fill a gap in existing studies. This new approach also prompts a reevaluation of key questions like the fair value of options and optimal delta hedging schemes.
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