**Risk frees and currencies, part 3**
Fundamentally, I view the flow of sustainable yield in crypto coming from staking. This creates the existence of parities between futures bases, funding rates, and staking yields for PoS currencies.
nopeitslily.substack.com/p/risk-frees-a… I also discuss in this post how we could potentially model the idea of an exchange risk premium, or an explicit discount (or excess yield) due to market expectations of risk for using a specific DEX or CEX. This relies on a few assumptions, and the construction

**Capital Inefficiency and DeFi options**
I'm about to go to lunch, but had this brainworm last night.
nopeitslily.substack.com/p/capital-inef…
1/x DeFi options have a lot of attractive properties, including the idea of essentially creating speculative markets larger than their underlyings, because you don't have such annoying real world things like Dodd-Frank or sophisticated hedgers.

Hi all,
I'm writing a series on crypto and some theorizing about quantitative risk/measuring risk premium.
It all starts from understanding what a risk free rate is.
Part 1: nopeitslily.substack.com/p/risk-frees-a…
(New!) Part 2: nopeitslily.substack.com/p/risk-frees-a… A lot of people talk about what a risk free rate should be, or the anomalously high returns achievable through traditional market neutral "arbitrages" like basis trading - longing spot crypto and shorting the future (or perp swap).

Okay, so I want to talk about some vol f**kery in the meme stocks, and how to play for fun and profit. That said, not investment advice and in the interest of not upsetting compliance, I'll leave off the actual stock names too.
So lately, things have been odd.
1/x There's this large company that we all know about that rallied like 50% in a month and pissed off a lot of people. This came at the same time as a larger sector trend rally, so it wasn't too unexpected. CEO might've merked it though.
But anyway, lots of people tried shorting.

Hi, it's been a minute since I made a thread (I deleted a prior one two weeks ago). This thread will be about natural gas and the United Kingdom, mostly since I have a research post about it coming out probably soon. I am not a natural gas trader unless you count FCG. I do not claim complete accuracy, and you're more than welcome to correct nicely if there's any misinformation, or get blocked otherwise. Anyhow --
1/n

So I wanted to do a brief writeup on this paper (arxiv.org/pdf/2108.00242…) by Bouchaud, but it's a bit complicated to do w/o more background. Essentially the two missing pieces one needs to understand are - Latent Liquidity Theory (Toth et al) & the GK Inelastic Market Hypothesis. I'm going to write this first thread on Latent Liquidity Theory instead, and make more threads about the other two in the near future.
Let's go. Latent Liquidity Theory comes from the following paper by Toth (arxiv.org/pdf/1105.1694.…):

Okay, a thread.
So one of the things that interests me is options theory applied to more macroscopic phenomena, and one of the more interesting and salient ways is the potential existence of the Fed Put (formerly known as the Greenspan Put).
en.wikipedia.org/wiki/Greenspan… There's a lot of hoopla about asset price inflation, and it's pretty accurate by any metric that there's an acceleration in beta, especially over the past few years. What this means in plainer English is that the market isn't just increasing in value (the market being well

What is volatility beta and the vol surface?
If we go back to the prior thread on volatility, we can make two critical observations:
- Volatility is a function of variance (how much spot "moves") and time
- Volatility isn't constant over time or space (price range) We should add two more important observations, which aren't necessarily theoretical, but have strong empirical support:
- Volatility tends to cluster in time - when volatility in one direction (e.g. down) is high, we expect in the near-term continued high volatility and vice vers

So, a brief thread since I haven't done one in a while about volatility. Unlike all my other threads, this will probably be wrong or something, I'll wait until someone who does vol chimes in or go ask like, Benn Eifert. Volatility in short, is a function of variance and time. Or in even simpler terms, we have some variable we're looking at - usually price, or more formally spot price. We're looking at how it evolves over time. The wider the distribution of spot prices that occur in a given time range, the more volatility we say is occurring.

Okay, so tomorrow is SPY's ex-dividend date. This is a very basic, finance 101 post about what dividends are, in case people don't know. At least traditionally in boomer times, a stock's primary value comes from paying out investors through an instrument called the dividend. A dividend is an issuance a company's board (usually) makes either at regular or irregular (special) intervals, to distribute profits to shareholders. Shareholders like profits and dividends, since it gives you consistent income. SPY traditionally issues a dividend every

So you want to see a meme squeeze:
Please remember I'm a 25 year old girl, and most of what I'm going to talk about with regards to volatility and options is wrong. That disclaimer aside, the popular topic again is meme stock rallies. What is a meme stock rally? 1/x A meme stock rally is essentially a dislocation that occurs in one or a group of related assets, usually thematically related (the semantic web I discussed many moons ago) that rallies for a short period of time. These tend to start on social media, and one of the foundational 2/

I don't know who needs to hear this today, but if you have two time series that both increase over time, they will especially visually show spurious correlation. This should be intuitive. Imagine I was looking at number of CS graduate students versus the number of arcades open. So I fit a model to both, because that makes sense. In this example it shouldn't really matter if I take the totals of each, because we can obviously surmise both the total and rate of CS graduate students is increasing over time. We can't obviously say the same about arcades

Let's talk about pricing models. One of the most active and by definition important areas of quantitative finance is pricing derivatives. Derivatives are a gigantic market, being worth notionally much, much more than the entire GDP of the planet, so there's a lot of interest 1/x in being able to properly price them. Most of us are familiar with the basic vanilla American option (call, put), but most of pricing theory is interested in the less well known exotics. A good recent example comes from @paradigm, which created a new class called the 2/x

Okay, today's lesson is on implied volatility. Implied volatility is a weird concept. In fact, all the option greeks are. Essentially for an option you are paying for the intrinsic value, which is easy to calc (current - spot), but more so for *extrinsic* value, or what we call optionality. Optionality is a weird concept related at a deep level to the idea of expectancy - the expected value of the difference between the current price and the price at expiry. This is slightly different for American options, but also who cares because those are annoying.

One of the most ridiculous trading myths I've ever heard of was the gap fill. Prices are more or less continuous processes with small jump discontinuities. Additionally, prices are in general martingales, so we expect that the expected value of the price in the future is the 1/x same as the price now (this isn't exactly true with varying volatility, but it doesn't matter too much in practice). In general, when price opens after a gap overnight, there's a high likelihood it will enter the gap, simply because it's continuous. However, once it's far past 2/