How do you get 1.2M of palladium and 12M of us 10-year treasury?

AI & Machine learning
1

Course Name: Futures Trading: Concepts & Strategies, Section No: 12, Unit No: 7, Unit type: WaterMarkVideo

please explain, the position holding, how come you get 1.2M palladium and 12M US 10-year treasury? what is the math behind?

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at 2:39

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how do you get the conclusion? the video says 10 times more risky, but I don't see any math or logic for it

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the explanation is in the notebook from the same unit: "From the above table, you can see that the volatility of the 10-year US Treasury is almost one-tenth of the volatility of palladium. The notional dollar value of palladium is approximately $1.2 million and that of a 10-year US treasury is $12 million, which is almost 10 times than that of palladium."

5

Hey Sebastian



Yes, $1M of palladium is 10 times more risky than $1M of US 10-year treasury. We want to give both an equal chance to make an impact on the PnL by following the volatility parity approach. Hence we get $1.2M palladium and $12M US 10-year treasury.



Looks like you were able get your answer from the notebook too. Let me know if you need more clarity :slight_smile: