Analysis of fly's and deriving implied vol to guide trading ideas (Part 1), Looking at valuation ideas to predict US markets (Part 2); Nomura

Abstract

Interning at Nomura was an good exposure as to how the investment banking industry_ works and how capital markets function. I got and exposure to different departments as in Equities and Fixed income as well as 2 different desks i.e. Research and Trading. A trading desk in a bank is generally involved in market making and interacts with brokers and sales people who act as intermediaries between client and the bank. They also have interaction with other banks with the help of brokers. Trading requires knowledge of the instrument, ability to be quantitatively good and a dynamic personality. My project required me to come up with a training idea which could help in someway provide a measure of the volatility of one contract using the volatility of 2 other contracts. I used historical data to find the volatility of the 3 legs of a fly and regressed to find the relationship between the head and the tails. The same relationship when projected in the future provided a relationship to get the implied vol of the head using the 2 legs The project was done in the correct manner and the manner was sufficiently satisfied with the quality of the work done. Moreover it was a good learning experience