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Bookmark or Share- How is PnL calculated - Quantitative Finance Stack ExchangeThe pnl calculation is done in 2 steps. By definition, you value your portfolio as of today, you value your portfolio as of yesterday, and the difference will be your pnl. Now that's an important number (that gets reported, etc.) but that doesn't give you a lot of information on what generated that pnl.
- Vanna - any practical uses for risk or pnl attribution purposes?PnL attribution is a sum of Greeks times [realized - implied by the model] Gamma attribution is Gamma times [realized vol - implied vol (vol used to price)] Vanna attribution is Vanna times [realized asset/volatility covariance minus the asset/volatility covariance your model implies] More or less, at least this should get you started
- market making - How do I calculate Sharpe ratio from P&L ...$\begingroup$ This paper (pretty old, true) basically echoes the $\delta_{PnL} / \sigma$ intuition: "[...] high frequency traders rarely position trades overnight so do not need to post capital, making it difficult to calculate their rate of return.
- volatility - Quantitative Finance Stack ExchangeGamma PnL = $ \frac{S * \sqrt{T}}{\sqrt{2\pi}} * (\sigma_r - \sigma_i)$ So locally for ATMF options, Vega PnL = Gamma PnL. Where Vega PnL is the change in option value marked at different IVs, and Gamma PnL is the integral (realistically a cumulative sum) of spread between realised and implied variance, scaled by cash gamma multiplied by dt.
- How to attribute daily options P&L between Greek sensitivitiesGamma PnL is $(1/2) \Gamma * (\Delta S)^2$ Essentially the first and second terms of a taylor expansion Vega and Theta are sensetivities to volatility and time, respectively, so their contribution would be:
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