If anybody has the Haug book handy could they quickly tell me what Kirk's (Black) approximation is for a spread option? I do not have my copy handy and am in urgent need of this model. Any help would be greatly appreciatedCheersPablos

Morning/afternoon/evening allCan anyone tell me in 1 line what an Asian forward is and how to price it - i suspect it's v straightforward but I have just come across it wrt to commodities. Cheers

<t>People really should stop being so paranoid about recruitment agents.The reason they ask where you've been before is to save themselves the embarrasment of sending you back there. It looks bad on their part and looks bad on you - their job is to screen candidates for the banks - that means gettin...

Have you read Hull? Just use a quick Binomial tree model .........

<t>This is a subject that's bothered me for a while and something I've spent a lot of time worrying about......I understand that the majority of grads try to embellish their CVs with claims of C/C++, VB, Excel, SAS etc. I have often seen many positions requiring "strong C/C++" skills but have not ap...

<t>Morning allI've been asked to estimate the expected value of a certain market charge related to the Power markets for the next years budget. This price is usually in the region of £0.50 but can spike or drop. For budget estimation the risk department have asked for an estimate for next years "ave...

<t>I've used S(t+1)-S(t), but all that gives me is a distribution of the size of the temperature change. It's the same thing as knowing that the price changes by £2, it means nothing unless you know what the change means relatively. A £2 change is more significant if the price was £10 as opposed to ...

<t>Thanks AaronThe reason i was looking at a transform is becuase of the occurence of near zero temperatures in the winter. When the weather is zero the return is infinite and so I get a huge variance as a result of 0 temperatures. Also negative temperatures mean I can't use log(S(t+1)/S(t)).... How...

<t>KrystleHave just seen your new string and I think that you're getting yourself a little bit het up over this. How long do you have to do this work? If you're trying to get an understanding of the Black Scholes formula without looking at the derivation you're not really going to get very far. Unfo...

<t>Afternoon allI have a question related to "weather returns". I'm using the modeldS=a(m-S)dt+v dW .....(1)to model the weather. I want to look at the "volatility" of the weather. Obviously I can't use the standard definitions of dS/S or ln(S+/S), since in this case they are meaningless with respec...

<t>What do you mean by set them?Use the random number generator in the Add Ons, but if you're not familiar with this then a very quick and dirty method would be to use the rand() function. In Excel, there is a function "rand()" (include the brackets) that generates a uniform variable between 0 and 1...

<t>Hi SchonbucherThanks again for the help - I understand what you are saying about the restriction on the drift term. I have again attempted to try and calculate the correct form for this given my dynamics for all t, not just t=0. Contrary to my PM I have had another look at my calculations and am ...

<t>Hi Sam There is a very good book with a couple of chapters on Jump processes by Fima Klebaner "Introduction to Stochastic Calculus with aplications" - it's by far the best book I have on Stochastics in terms of readability. Give that a craak. Also with Ito's formula for jumps just look at it heur...

<t>MrEzmj is right - unless I'm missing the point as well, it seems to me that you are looking at a zero strike spread option. If you're underlying is S(t) and index is X(t) then a spread option with strike K will give you a payoff max(S(T)-X(T)-K,0)In your case just set K=0. There is no analytic so...

<t>Hi krystle920I might be getting on a bit but it wasn't too long ago that I can't first remember looking at options and pricing using MC. It's a very steep but fortunately quite easy learning curve. If this is an undergrad project that you are trying to do then I would suggest a couple of things. ...