I've been working on a model, and I don't have much knowledge about what the state of theo modeling is at various firms to know whether or not it's useful. I have some connections at a few top-15 prop firms (by volume) to know how it stacks up against them, but these firms aren't ones like SIG or CTC who're known for their top notch models.
The firms I'm familiar with don't really use a model per se at all. They usually stick to modifying components of a black-scholes style pricer to hack around the deficiencies of the black-scholes model. I'm not really interesting in knowing how good these types of models are, but instead the types of models like Heston that represent a full description of a stochastic process. Can anyone here shed some light into how good these models are at top trading firms? For example, do any firms run a model that can run theos inside the BBO in SPX for 99% of the options? If not, what is the best they can do?
I'm asking because I'm going to make a pitch to some people about buying/using/investing in my model at some point, and I'd like to know if I have something that is at all interesting to the players in these markets. My model can price inside the NBBO in 90% of options, and inside a "double width" NBBO 99% of the time while running in 10ms, but I really have no clue if this would be useful or impressive. Any insights would be welcome!
The firms I'm familiar with don't really use a model per se at all. They usually stick to modifying components of a black-scholes style pricer to hack around the deficiencies of the black-scholes model. I'm not really interesting in knowing how good these types of models are, but instead the types of models like Heston that represent a full description of a stochastic process. Can anyone here shed some light into how good these models are at top trading firms? For example, do any firms run a model that can run theos inside the BBO in SPX for 99% of the options? If not, what is the best they can do?
I'm asking because I'm going to make a pitch to some people about buying/using/investing in my model at some point, and I'd like to know if I have something that is at all interesting to the players in these markets. My model can price inside the NBBO in 90% of options, and inside a "double width" NBBO 99% of the time while running in 10ms, but I really have no clue if this would be useful or impressive. Any insights would be welcome!
