Thanks for your comments Avt.What should I read about the Heston model, since I dont know it?

<t>I forgot to say that I also have 10D (10 delta), 25D, 37D & ATMF for puts (in the case of ATMF is the same one), so I have three market observed points around the ATMF on each side.I tried cubic splines and looked nice but sometimes (depending on the shape of the surface) some anomalies appea...

<t>I have market quotes on vol only for 10D, 25D, 37D & ATMF for 1 month to 12 months.I am trying to interpolate vol to get a vol surface.Lets say I want to get the vol for 15D and 45 days.Here goes my problem: either using bi-lineal interpolation or bi-cubic splines interpolation I can first in...

<t>Thanks Johnny, your math was very helpful.In terms of intuition I am not sure why increasing vol would make it more likely for the call to move upward than downward. An increase in vol should not change the future expected value of the asset, or is it that the lognormal distribution by being non-...

Monk, I agree with your statement that it depends on the underlying distribution but once we assume lognormal my problem is understanding why that makes the delta for a call ATMF be higher than 50% and not lower.thanks,Osvaldo

As I understand it (r-d) would take us to the fwd price and by subtracting (S^2)/2 we get to an expected value at expiry that is lower than the fwd, and thus the call struck at the fwd should have a delta<50%.What is wrong in my reasoning?Thanks

<t>Why is it that BS (Black & Scholes) gives a delta higher than 50% for a call ATMF if there is a negative drift of -(S^2)/2 (S being the std dev)?I would think that due to the neg drift, the expected value of the underlying asset at expiry would be lower than the forward and then a call struck...

Thanks AnthonyIt is really good.I am not sure I understand the second curve on the graph.One of the curves is the resulte of the evaluation of the function defined but dont know what the other curve is.

Anthony, can you please explain more.I cant find the evaluate function.I am very interested in this method.Thanks