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If options pricing is largely solved, do you think exchanges could provide an API where instead of specifying the price and quantity for hundreds or thousands o
by jzwinck 6y ago
If options pricing is largely solved, do you think exchanges could provide an API where instead of specifying the price and quantity for hundreds or thousands of options on a stock, market makers could send a much smaller message containing their latest risk and model parameters, and have the exchange run a standard model internally to generate the quotes?
Since the model to convert parameters to prices and quantities would be known in advance to all traders, the next step could be providing a feed of current parameters which traders could use to build their own view of the public book. They'd still need plenty of quotes published piecemeal as now (as not all quotes would be model-generated) but the messaging could be much more efficient, and that could lead to more options trading.
- JumpCrisscross 6y ago> market makers could send a much smaller message containing their latest risk and model parameters, and have the exchange run a standard model internally to generate the quotes? No market works like this. The smaller-still message of a price is sent and disseminated. When you buy a flight, you want the price of the ticket—not the airline’s fuel and tariff costs.