<t>outrun: I want to move the smile.Traders have three numbers for the smile: the ATM vol, the RiskReversal (slope of smile between strikes that move with the spot), and STrangle (curvature of smile between strikes that move with the spot). What they want to know is what their position becomes when ...

I price a vanilla call.My model has local vol (has yours ?) and i need to recalibrate it when i blip spot (I am in FX, we move the smile along the spot for greeks).What i call theta is a parameter that interpolates between implicit and explicit scheme. For CN it is 50%.

<t>I work in a big bank, where local vol pricing using pde has been in prod for years. I have a strange problem with gamma. Say I price a vanilla call.The typical way is to hold the pricing grid fixed. The local vol changes when I bump the spot, but the pricing grid is the same. If i use a uniform m...

<t>I have tried to use TOTEM for correlation between FX long-dated vols. This data is monthly and history is not very long (a few years). It is said that banks tend to "cheat" on valuable data but it gave reasonnable estimates for vol of vol. However I stumbled on the correlations. I suspect that is...

<t>I need to estimate a correlation between time series that have been marked at different times. Essentialy there is liquid data that is marked often, and some less liquid that is left the same until it is remarked.What is the optimal way to get a (valid) correlation matrix without dropping too man...

<t>The most traded pair, USDJPY, is premium adjusted. This means a client who buys a call pays in dollar and not yen, the natural currency. The hedger will have to buy some USDJPY, but this dollar amount - the premium - is already there. The initial delta is for some reason the amount to buy in addi...

Too much coffee ? Delta neutral is not X=Se^((r1-r2+v^2/2)T) but X=Se^((r1-r2-v^2/2)T) for premium adjusted currency pairs, like...well most currency pairs.

<t>Fully agree. But the problems are dire:short dated : little exotics, no margins, unsophisticated investors (and accordingly, traders). Only chance to get money is the Relative Value RBS way it seems. Crucially, do you think there is a chance the Fx market ever hits the juicy retail sector ?long-d...

Credit quants in BoA are few. I don't know their influence. There are good business people I think. But at the end of the day what is most important, good quants to make the business scalable, or big franchise to make margins. You need both, and you need to start with the sales.

<t>I would never work at Barclays unless you are not interested in switching to business. Publishing is not the sign of a good bank I think. Rather the opposite in some sense. What counts according to me is the power of the quants on managing the book. Whether they are people on the desk with a part...

<t>In theory you would hedge with 3 spots + 3 smiles. Now I agree that if you had only one option you would "just delta hedge + ATM".First, since vol and skew are very correlated with spot, the delta you'll have using a better model should be better.Moreover if your desk is big enough the quanto opt...

If skew/smile is strong on the underlying or the base. Effect may be big because the drift adjustment is then spot dependent through the vols, adding some convexity. This additionnal quanto effect can be dozens of % as large as the BS quanto adjustment effect !

Don't you guys in equities use jump models to get the term-structure of skew ? In which case the - uncapped variance swap - is not vanilla anymore. Isn't this more important than wondering about the cap thing ?PS: moreover, my feel is that the capped one would still be vanilla...

This is wrong for american options.

<t>Is it possible to separate instantaneous dynamics of the smile when spot moves from finite-time forward smile ?instantaneous dynamics of the smileI mean the way risk reversal (in FX ; skew in equity) changes when spot move. More precisely, i guess i could quantify that by computing the expectatio...