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Quantitative Finance · Glossaire

Qu'est-ce que « Convexity budget » ?

Definition 17.2 Strategies II: Volatility, Relative Value, Macro and the Bank Desks · Chapitre 17 — Discretionary Macro

A convexity budget is the premium a manager is willing to spend on options to express views, whose most it can lose; spending it buys positions whose loss is known in advance and whose gain grows with the size of the move.

One view (a 50 basis-point fall in six months) expressed six ways on 20 000 synthetic paths: the mean payoff per unit of each expression’s risk budget, and the share of paths on which the view was right but the expression lost. Data: s2_macrobook.table.
Figure 17.1. One view (a 50 basis-point fall in six months) expressed six ways on 20 000 synthetic paths: the mean payoff per unit of each expression’s risk budget, and the share of paths on which the view was right but the expression lost. Data: s2_macrobook.table.
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