Imported from previous forum
The Global Technical Committee met on September 20, 2007 and reviewed the Volatility and Option Pricing Parameters Proposal. The specification now enters into a 15 day public comment period in which public review and feedback is encouraged. Once the Public Comment period closes, the Global Technical Committee will meet to review public comments before final approval.
Please post feedback, comments, and questions as replies to this discussion thread.
A link to the Volatility and Option Pricing Parameters Proposal can be found at
http://fixprotocol.org/documents/3539/FIX%20Gap%20Analysis%20Option%20Pricing%20Parameters%20v03.doc
The Public Comment Period closes on October 10, 2007
I would suggest including a “dividend yield” for the period considered so there’s a minimum of information required to drive a Black-Scholes model.
Richard.
Richard -
FIX offers a YieldType, tag 235, which has a slew of enumerations to describe the yield type. Are you sure that one of these values wouldn’t work as a dividend yield? If not, a new enumeration for ‘Dividend’ could be added.
Matt Simpson
I would suggest including a “dividend yield” for the period
considered so there’s a minimum of information required to drive a
Black-Scholes model.Richard.
I’m not convinced that OptionHedgeDelta needs to be a new field. PriceDelta tag 811 is already used to represent the option’s delta and is a number between 0 and 1. The only difference for this implementation that I see (compared to OCC’s) is that it is multiplied by negative 1 to indicate short hedging positions. I would recommend that we use the PriceDelta and amend its description. Perhaps something like, “Delta calculated from an option’s price. May be signed to indicate hedging ratio when used within the context of a trade or position.”
The GTC in discussions on this topic felt that the PriceDelta field (tag 811) was ambiguous in name, definition and usage and a new field with a definitive purpose is needed which clearly expresses that delta is the change in the price of an option based on the movement of the underlying - OptionHedgeDelta
We should be willing to consider keeping tag 811 but perhaps change its name to the new proposed value of OptionHedgeDelta. PriceDelta does not precisely convey the purpose and use.
Matt Simpson
I’m not convinced that OptionHedgeDelta needs to be a new field.
PriceDelta tag 811 is already used to represent the option’s delta and
is a number between 0 and 1. The only difference for this implementation
that I see (compared to OCC’s) is that it is multiplied by negative 1 to
indicate short hedging positions. I would recommend that we use the
PriceDelta and amend its description. Perhaps something like, “Delta
calculated from an option’s price. May be signed to indicate hedging
ratio when used within the context of a trade or position.”
Based on this feedback we will alter the proposal to modify the definition of tag 811 and change the name from PriceDelta to OptionDelta. This tag will be used rather than a new OptionHedgeDelta field.
An option delta is defined as:
- A value between -1 and 1
- An expression of the change in the price of an option based on a movement in the price of the underlying
- A value indicating the number of underlying equivalents necessary to create a delta neutral option position
The GTC in discussions on this topic felt that the PriceDelta field (tag
811) was ambiguous in name, definition and usage and a new field with a
definitive purpose is needed which clearly expresses that delta is the
change in the price of an option based on the movement of the underlying
- OptionHedgeDelta
We should be willing to consider keeping tag 811 but perhaps change its
name to the new proposed value of OptionHedgeDelta. PriceDelta does not
precisely convey the purpose and use.Matt Simpson
I’m not convinced that OptionHedgeDelta needs to be a new field.
PriceDelta tag 811 is already used to represent the option’s delta and
is a number between 0 and 1. The only difference for this
implementation that I see (compared to OCC’s) is that it is multiplied
by negative 1 to indicate short hedging positions. I would recommend
that we use the PriceDelta and amend its description. Perhaps
something like, “Delta calculated from an option’s price. May be
signed to indicate hedging ratio when used within the context of a
trade or position.”
One point.
Why should it be between -1 and 1? Of course its between -1 and 1 for the options we are familiar with but I do not see an overriding need to put boundaries on this value.
Based on this feedback we will alter the proposal to modify the
definition of tag 811 and change the name from PriceDelta to
OptionDelta. This tag will be used rather than a new
OptionHedgeDelta field.An option delta is defined as:
- A value between -1 and 1
- An expression of the change in the price of an option based on a
movement in the price of the underlying- A value indicating the number of underlying equivalents necessary to
create a delta neutral option positionThe GTC in discussions on this topic felt that the PriceDelta
field (tag
811) was ambiguous in name, definition and usage and a new field with
a definitive purpose is needed which clearly expresses that delta
is the change in the price of an option based on the movement of
the underlying
- OptionHedgeDelta
We should be willing to consider keeping tag 811 but perhaps change
its name to the new proposed value of OptionHedgeDelta. PriceDelta
does not precisely convey the purpose and use.Matt Simpson
I’m not convinced that OptionHedgeDelta needs to be a new field.
PriceDelta tag 811 is already used to represent the option’s delta
and is a number between 0 and 1. The only difference for this
implementation that I see (compared to OCC’s) is that it is
multiplied by negative 1 to indicate short hedging positions. I
would recommend that we use the PriceDelta and amend its
description. Perhaps something like, “Delta calculated from an
option’s price. May be signed to indicate hedging ratio when used
within the context of a trade or position.”
I know it’s not directly covered by your proposal, but I’d like to see some of these tags added to Market Data messages, e.g. as an MDEntryType. That would allow parties to e.g. stream implied volatility prices.
Was this discussed?
There may certainly be some use for these tags on the market data messages and some in the form of new MDEntryType values. However, at this time there is not an expressed business need which generally acts as the driver for extensions to the specification. So, it was discussed but the decision was to leave it out until a formal request is forthcoming.
I know it’s not directly covered by your proposal, but I’d like to see
some of these tags added to Market Data messages, e.g. as an
MDEntryType. That would allow parties to e.g. stream implied
volatility prices.Was this discussed?
how will option strategies with deltas of bigger than 1 be handled?
The Global Technical Committee met on September 20, 2007 and reviewed
the Volatility and Option Pricing Parameters Proposal. The specification
now enters into a 15 day public comment period in which public review
and feedback is encouraged. Once the Public Comment period closes, the
Global Technical Committee will meet to review public comments before
final approval.Please post feedback, comments, and questions as replies to this
discussion thread.A link to the Volatility and Option Pricing Parameters Proposal can
be found athttp://fixprotocol.org/documents/3539/FIX%20Gap%20Analysis%20Option%20P-
ricing%20Parameters%20v03.docThe Public Comment Period closes on October 10, 2007
There is no limitation on the value which may be used. The description was modified slightly that the delta is normally between -1 and 1 for a single outright option.
For a strategy, a delta outside of that range is allowable.
how will option strategies with deltas of bigger than 1 be handled?
The Global Technical Committee met on September 20, 2007 and reviewed
the Volatility and Option Pricing Parameters Proposal. The
specification now enters into a 15 day public comment period in which
public review and feedback is encouraged. Once the Public Comment
period closes, the Global Technical Committee will meet to review
public comments before final approval.Please post feedback, comments, and questions as replies to this
discussion thread.A link to the Volatility and Option Pricing Parameters Proposal can be
found attp://fixprotocol.org/documents/3539/FIX%20Gap%20Analysis%20Option%20P-
ricing%20Parameters%20v03.docThe Public Comment Period closes on October 10, 2007
What is the outcome of the discussion?
Is there ‘standart’ way of including Volatility in FIX messages?