<t>Anyone know of any good papers to read on fx correlation swaps?In terms of intrinsic currency volatilities and triangulation of currency volatilities.Have seen this:Correlation SwapsAlso read some good things from the following book pg 215-245Foreign Exchange Option Pricing: A Practitioners Guide...

<t>Attached is a simple code in matlab that can price this for you:%Multi asset path dependent%Input parameterclc; clear; close all%Input parametersSims=10000;Paths=2500;s1=1;s2=1;K1=1;K2=1;t=1;v1=0.8;v2=0.8;cor=0.99;r1=0.00;r2=0.00;d1=0.00;d2=0.00;%Take correlations to produce Cholesky decompa=[1 c...

in terms of replication. thanks

Is there any known functional transformation to decouple a binary option (say EURGBP) into two related components (say EURUSD and USDGBP - given appropriate adjusted strikes). I would greatly appreciate anyone directing me to papers or any other sources of information regarding this.

<t>The model being used to price the variance swap is Gatheral. Unfortunately I'm using limited information sent to me but I've been told that there is a functional transformation to represent a volatility swap from outputs from a variance swap with the above formula. The purpose is to see if in fac...

<t>I recently received an analytical expression for a volatility swap as a variance swap and have been (spared) the mathematical proof but cannot tie the relationship with the results. The first segment claims that the corresponding volatility strike (Kvolswap) can be expressed as a function of the ...

i don't know about historical information but the markit page has some good data http://www.markit.com/cds/cds-page.html

<t>Imagine software which is used by the big banks has an ASP version of their offering which gives you access to real-time market data for equities, fixed income, currencies and credit along with a suite of risk tools like parameteric VaR, Monte Carlo analysis, scenario analysis, and custom built s...

Most CDX are quoted in bps. Dow Jones seems to quote these as a percent. Can this quote be converted via (1+CDS Econ/Par)*100? Just need to verify.Thanks

<t>Trying to model a correlation swap using a replicating strategy of multiple variance swaps. Looking at a simple example with two underlyings how does one go about modeling this? Is forward correlation a factor in this case? If I'm breaking the structure down into its components and computing forw...

<t>So if I understand you correctly you opt for a simpler model with actual options in the market and integrate over the range of prices up to the cap. You include a (realistic assumption) of correlation between returns and volatility as well as asymmetirc jumps in pricing the derivatives. This answ...

<t>So the crux of this is how to model options on variance. Jim Gatherals paper focus more on the model volatility of volatility. From your reply I gather that by describing a process where one creates a portfolio where they are long the vol swap and short a portfolio of options (log contracts to mi...

<t>So Long a regular vol swap struck at 18 and short a call on vol swap struck at 25? A call option where the underlying is the vol swap. This implies that I need to model the volatility of volatility swap in pricing? Call is a function of underlying volatility swap, strike is 25, term to maturity, ...

Yes. I buy a one year 18 percent vol swap capped at 25. Does this merely imply that I go long the 18 percent and short the 25? Aren't there more intricate assumptions that must be made around the barrier? This is what I would like to know. Any help would be appreciated.