Hi all, I have a implied black scholes volatility surfaces for European style options on futures. I need to be able to price basket options and spread options. As far as I understand I can derive a cumulative distribution function for each underlying futures contract by pricing very tight put spread...

I’m actually using it for options on forward delivery of daily gas and electricity where the underlying can indeed be less than zero and possibly more importantly, the movement we see in forward prices is not at all lognormal, ie 0.10 movement in the underlying price is just as likely when underlyin...

actually I understand that i can redistribute the call formula to incorporate the cost of carry, b

my question is really - do I need to incorporate b into my formula for d1?  I ask becasue b features in d1 for the Black Scholes model

thank you for this - actually I have one final thing I wanted to make sure I am doing right: in my Black Scholes formula d1 = (Log(S / X) + (b + v ^ 2 / 2) * T) / (v * Sqr(T)) d2 = d1 - v * Sqr(T) call = S * Exp((b - r) * T) * CND(d1) - X * Exp(-r * T) * CND(d2) where b = cost of carry and r = risk ...

ok I've done it, sorry I've not actually played around with, or evidently, fully understood, the discounting aspects in option pricing but you have helped me a great deal, the formula for an option on a normally distributed futures contract I believe is: Call = e^-rt((S - X)N(d1)  +  v*sqrt(T)*n(d1)...

Ah blimey, yes, thanks so much, I can’t believe I didn’t think of this. So the bachelier formula that I have is for options on a spot contract. Would you possibly be able to help me tweak it so it works for a forward contract? Ie so that where X=S puts and calls are the same premium, it would be rea...

Right, yes. That is indeed the formula for put call parity and it does indeed hold true in this formula. But now I'm more confused, is put call parity in Black Scholes different then? surely it is the same formula? One of the first things I learned in option pricing was that put call parity in Black...

Hi I was hoping someone could help me with something that is confusing the life out of me and honestly doesn't seem to be explained anywhere on the entire internet... I need an option model for pricing options on normally distributed underlying as opposed to log normally distributed i.e. Black Schol...

<t>Hi there,since I'm not too familiar with money markets I wanted to ask you guys for a little help on something I know is going to be extremely simple but I cant seem to find a definitive answer/source online.I need to find the most realistic, trade-able, interest rate curve in the market.i.e. a r...

<t>Thanks for the responses .... I called this topic "Liquidity's Impact On Gamma Positions" because I wanted to focus on how you would perhaps incorporate liquidity itself into your option pricing (even if it was nothing especially mathematical and was more based on feel or practical experience) an...

<t>I have been discussing a concept with some colleagues and I have a hypothetical question that I thought people might like to consider...Assume there are 2 markets that are 100% correlated.Assume both markets have very liquid options markets and that implied vols, skews etc are exactly the same.As...

OK great thanks for that... When you say "current IV" do you know if that is just an ATM vol or is it some interpretation of IV based on a full surface of strikes?

<t>I found myself watching a few videos on tastytrade.com recently... In particular their 'Market Measures' and 'Options Math' shows. They talk of "IV Rank" a lot and I wondered if anybody has come across it before and could explain exactly what it is?So far I know that it's some measure of implied ...

it's ICE UK Natural gas. Also called NBP

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