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by Randor
March 24th, 2024, 5:39 am
Forum: Trading Forum
Topic: Treasury swap spreads payoff
Replies: 2
Views: 130

Re: Treasury swap spreads payoff

Yes swap minus treasury i meant
by Randor
March 22nd, 2024, 1:02 pm
Forum: Trading Forum
Topic: Treasury swap spreads payoff
Replies: 2
Views: 130

Treasury swap spreads payoff

Dear community I see the brokers quote these Treasury swap spreads (basically treasury yield minus sofr swap rate)  per integer years tenor what is the actual payoff of these trades ? i believe these trades are also called SpreadOvers say the 5y spread today is 20bp and i enter into that 5y trade to...
by Randor
August 25th, 2023, 7:07 am
Forum: General Forum
Topic: rfr caplets - intuitively why the one-third?
Replies: 4
Views: 3472

Re: rfr caplets - intuitively why the one-third?

just saw your reply now , many thanks!
by Randor
August 22nd, 2023, 6:51 am
Forum: General Forum
Topic: rfr caplets - intuitively why the one-third?
Replies: 4
Views: 3472

Re: rfr caplets - intuitively why the one-third?

yes that is what i thought too , there too my same question applies -  is there any intuitive reason why a third
by Randor
August 15th, 2023, 12:46 pm
Forum: General Forum
Topic: rfr caplets - intuitively why the one-third?
Replies: 4
Views: 3472

rfr caplets - intuitively why the one-third?

i have seen a math derivation that proves that for a rfr caplet (caplet whose underlying is say sofr compounded in arrears) , that the total variance of the can be approximated to equal the rate vol ^2 * time , where time is years from now till one-third of the way through the caplet. clearly the va...
by Randor
August 8th, 2020, 11:18 am
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

Re: sensitivity of american digital (binary) options to changes in volatility skew

That CEV looks very hard to understand and implement for me. I think that implementing a tree thats calibrated to option prices may be the simplest approach for me to start with. I have Dermans GS papers that i can try. But i think perhaps Rubinsteins approach may be quicker and easier with less cha...
by Randor
August 4th, 2020, 12:03 pm
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

Re: sensitivity of american digital (binary) options to changes in volatility skew

i realise why the ED is not monotonic in vol, its because , for an OTM ED, as vol goes up, it at first gets more likely to be ITM, but then, it gets less likely because the middle of the distribution (=X=F*exp(volsqT) ) recedes away
by Randor
August 3rd, 2020, 7:53 am
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

Re: sensitivity of american digital (binary) options to changes in volatility skew

I have no idea how to do montecarlo for americans! Need some brownian bridge i guess but with local vol...

Thanks for the paper llooks very complicated but i will try that out!
by Randor
August 2nd, 2020, 12:16 pm
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

Re: sensitivity of american digital (binary) options to changes in volatility skew

Do you by any chance have VBA for that that i could test ? Or some algo that i can try implement to test it?
by Randor
July 31st, 2020, 2:24 pm
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

Re: sensitivity of american digital (binary) options to changes in volatility skew

How about if we are considering a LOCAL VOLATILITY model, as opposed to other possible models, then is the reasoning from my OP true? That is weird about the ED! Sounds strange , i will test that out! By Monotonic in local skewci meant that since an ED price = -1×( dc/dk) = -1×( pc/pk + dc/dvol × dv...
by Randor
July 30th, 2020, 8:24 pm
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

Re: sensitivity of american digital (binary) options to changes in volatility skew

Hmmm..
ED is monotonic in its Local skew.
Can you elaborate in more detail?

Btw whats a sinple way to price the OT given you have prices of EDs? As that perhaps may help here
by Randor
July 30th, 2020, 5:35 am
Forum: Student Forum
Topic: sensitivity of american digital (binary) options to changes in volatility skew
Replies: 14
Views: 6946

sensitivity of american digital (binary) options to changes in volatility skew

I am trying to think what is the sensitivity of american digitals (henceforth binary or one-touch (OT)) options to a) implied volatilities between atm and the barrier (henceforth ITM vols), b) implied vols on the other side (henceforth OTM vols) , c) the slope of the volatility smile (henceforth ske...
by Randor
May 15th, 2020, 3:49 pm
Forum: Economics Forum
Topic: Economic suspension
Replies: 19
Views: 14502

Re: Economic suspension

sorry writing a month late but anyway, * we already see this economic suspension, in the REAL economy lockdowns, but i guess you are talking for some much more extended period * in the financial economy, nothing has stopped.   * there have been bailouts to both wall st and main st, sometimes as hand...