Speaking with a rates trader: cents or bips?

As everyone knows: one basis point is 0.01%, and one cent is 0.01% too. The difference is that we typically use cents when we refer to an upfront price, and use bips when we refer to a rate (in a swap for example). So a trader may ask: "what is 3 bps worth upfront?" which … Continue reading Speaking with a rates trader: cents or bips?

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Ito’s product and quotient rules as described by a trader

Ito's product and quotient rules are a corollary of the Ito lemma, and are one of the ┬ámost important parts of the stochastic-calculus toolkit. When I first started working as a quant I managed to find an alternative form for the rules which sits well in a Black-Scholes type of world and corresponds more closely … Continue reading Ito’s product and quotient rules as described by a trader