Serving the Quantitative Finance Community

Search found 3225 matches

by Martinghoul
July 20th, 2007, 6:11 pm
Forum: Technical Forum
Topic: earning LIBOR risk-free
Replies: 3
Views: 69916

earning LIBOR risk-free

<t>Happy, you're right and I can tell you that the first time we encountered this particular issue, it caused all kinds of questions...The answer is simply that there's no arbitrage, because the cost-of-carry (or financing, or whatever you choose to call it) on your positive PV OTC derivative positi...
by Martinghoul
July 20th, 2007, 4:57 pm
Forum: Technical Forum
Topic: Dumb/interesting Black-Scholes question
Replies: 3
Views: 68782

Dumb/interesting Black-Scholes question

<t>Antonio, the point here is that the t in question is not the time to expiry of the option (T), but rather the time elapsed since inception of the option. Thus, T > t >0 (sorry for a stupid typo in my original post)... So, and it's the same thing, I am looking for an expression for MAX(moneyness(t...
by Martinghoul
July 19th, 2007, 7:53 pm
Forum: Technical Forum
Topic: Dumb/interesting Black-Scholes question
Replies: 3
Views: 68782

Dumb/interesting Black-Scholes question

<t>My question is quite possibly stoopid, but here goes...In a simple Black-Scholes world, for a simple option, if I am trying to compute E[max(BSDelta(t))], where T < t < 0 with T as time to expiry. What kind of a function of t, do you expect this thing to be? It should be a simple thing, but someh...
by Martinghoul
July 19th, 2007, 7:45 pm
Forum: Technical Forum
Topic: perfect asset swap
Replies: 2
Views: 71068

perfect asset swap

I might be able to help if you be a bit more specific... What type of asset swap we're talking about?
by Martinghoul
April 6th, 2007, 12:58 pm
Forum: Technical Forum
Topic: Comparing Index-Linked Bonds with different indexation lag
Replies: 4
Views: 77216

Comparing Index-Linked Bonds with different indexation lag

<t>renikus, sorry for the delay...You're generally right, i.e. asset swaps are the best way to look at these buggers. However, there's many types of asset swaps, par/par, proceeds etc. Of those the best method (it makes the least number of assumptions and is the most accurate) is to use z-spreads, w...
by Martinghoul
March 22nd, 2007, 7:53 pm
Forum: Technical Forum
Topic: Comparing Index-Linked Bonds with different indexation lag
Replies: 4
Views: 77216

Comparing Index-Linked Bonds with different indexation lag

<t>Hehe, let me guess, you're looking at the old gilts vs the new Canadian-style ones? I think the right way is to look at the actual mechanics of the calculation for the different lags. You can then calculate all the characteristic of the bonds, yields, carry, bei vs swap or appropriate nominal bon...
by Martinghoul
February 26th, 2007, 6:56 pm
Forum: Technical Forum
Topic: Did I price this Knock In Knock Out product correctly
Replies: 4
Views: 78894

Did I price this Knock In Knock Out product correctly

Ain't this just a double-barrier option? What's K in relation to S(H) and S(L)?
by Martinghoul
February 21st, 2007, 4:46 pm
Forum: Technical Forum
Topic: Implied volatility of short sterling options
Replies: 1
Views: 79798

Implied volatility of short sterling options

That "indicative ATM volatility" is only valid for the ATM straddle, in which case, I am pretty sure, it is computed with simple Black-Scholes.If you describe your logic in a bit more detail, I might be able to help you some more...
by Martinghoul
January 31st, 2007, 6:03 pm
Forum: Technical Forum
Topic: Do dealers price convexity into longer-dated IMM FRAs
Replies: 3
Views: 81206

Do dealers price convexity into longer-dated IMM FRAs

<t>Good dealers certainly do price convexity into FRAs.This is not to say that long-dated sterling FRAs are the most liquid of instruments (I've only done a trade like that once and it was more from necessity than by choice. The one time I did, a dealer I would consider good gave me a mkt about 1.5 ...
by Martinghoul
January 24th, 2007, 8:02 pm
Forum: Technical Forum
Topic: Convexity of swap flies
Replies: 0
Views: 81005

Convexity of swap flies

<t>A couple of questions to the masters out there, if they, in their infinite wisdom, be so inclined...1. Convexity measure for swaps seems like it should be calculated in the exact same boring manner as it is for bonds. Any particular reasons you can think of why it shouldn't be? Is it reasonably s...
by Martinghoul
August 14th, 2006, 7:03 pm
Forum: Technical Forum
Topic: Cash and Physically settlement Options
Replies: 7
Views: 99225

Cash and Physically settlement Options

<t>Cash-settlement for swaption expiries is indeed the EUR (and GBP) convention. There's two different calculation methods, too: IRR and PVBP. In pnl terms it makes a difference whether you cash-settle a swaption (and exchange delta at the fixing) or expire into a physical swap, because even the mor...
by Martinghoul
August 14th, 2006, 1:01 pm
Forum: Technical Forum
Topic: Double digital
Replies: 2
Views: 95920

Double digital

I know... I think these little buggers are also called "two-asset cash-or-nothing options". Basically given two assets S1 and S2 and two strikes K1 and K2, you receive a fixed payment if S1 < K1 and S2 < K2 (this is a considered a put).
by Martinghoul
August 11th, 2006, 1:59 pm
Forum: Technical Forum
Topic: Double digital
Replies: 2
Views: 95920

Double digital

<t>I was just wondering if anyone knows of any work (papers, etc) on pricing double digital options. Apart from the short article by Drezner on numerically estimating the bivariate normal distribution integral (which is a useful gimmick), I don't know of anything, but then again I could just be an i...
by Martinghoul
August 10th, 2006, 9:38 am
Forum: General Forum
Topic: Sterling swaps and short-sterling futures project
Replies: 10
Views: 110865

Sterling swaps and short-sterling futures project

<t>Here you go:L_H0_20100317,0.078422L_H1_20110316,0.113676L_H2_20120321,0.154829L_H3_20130320,0.203539L_H4_20140319,0.252654L_H5_20150318,0.315836L_H6_20160316,0.374616L_H7_20070321,0.002349L_H8_20080319,0.018769L_H9_20090318,0.045024L_M0_20100616,0.087587L_M1_20110615,0.122040L_M2_20120620,0.16657...
by Martinghoul
July 20th, 2006, 5:50 pm
Forum: Student Forum
Topic: IR mean reversion trading
Replies: 5
Views: 104125

IR mean reversion trading

Methinks, it's all due to carry (rolldown), based on the shape of the vol surface... However, as pointed out, positive carry by itself is no reason to get into a trade.