pnl for Dummies
pnl for Dummies
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It's also possible to analyse the skewness and kurtosis of your time period PnL by getting third and 4th moments of $Y_t$ respectively. Presumably you may conclude that for 2 collection with similar expectation and variance, you may favor the just one with beneficial skew or reduced kurtosis, but maybe not depending on the self-confidence of the industry view, and so forth..
$begingroup$ The pnl calculation is completed in 2 actions. By definition, you price your portfolio as of these days, you benefit your portfolio as of yesterday, and the main difference will probably be your pnl.
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BongoBobBongoBob 2111 silver badge44 bronze badges $endgroup$ one $begingroup$ that may be also extensive for your parametric method to estimate pnl. are not able to you reprice your cds with present-day interest rate curve and cds spreads? $endgroup$
The net result of everything is the fact that enhanced delta hedging frequency does just contain the smoothing impact on P/L over lengthy plenty of time horizons. But such as you show you are exposed click here to one particular-off or scarce mean reversion (or trend) results, but these dissipate about significant samples.
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As outlined I don't think one particular process is more specific, but a technique may very well be required or proposed by marketplace standards or rules.
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$begingroup$ Rather The natural way The 2 PnLs do not necessarily coincide. Inside the "college situation" you don't contact the portfolio at $t_1=t+delta t$ and liquidate it only at $t_2=t+twodelta t,.
Alternatively, the gamma PnL is paid to you personally to the side, not on the choice high quality, but from your trading actions during the fundamental you perform your hedging account.
Above any more length of time, There exists hardly a statistically substantial autocorrelation in large frequency returns. If there was, then the above mentioned can be relevant which would dampen the impact.