<t>erstwhile,I agree with your comments. let me add that there are many other inconsistencies in the world of equity derivatives, which are to me much more worrying than the basket approx issue. most of the best banks are aware of at least some of them (I can't claim I know them all of course), and ...

<t>you can get tradable prices on SPX combos up to 10yrs by calling any decent broker. a combo is call-put at same strike. they are quoted with a reference swap rate so backing out a divyield is trivial.other indeces will be harder to go out that far.how to extrapolate divyields to maturities longer...

<t>QuoteOriginally posted by: secondMan"... sorry for being dumb. but i do not really get this. someone wants to sell stock in order to receive a relatively small premium, but d o e s n o t care about the price he will finally have to make delivery? don't get me wrong, i think people discovered shor...

sorry money, too many questions, not enough time.but on 3):of course you do have to do that, only sensible thing to do. I do not know personally any quants that build estimation models for correlation (though certainly there are some). IMHO it would be a huge waste of time.

well we agree. you call it tails, i call it jumps

<t>actually aaron index surfaces have more skew than single stocks. that is well known: market assumes correlation grows massively on the way down.what eppie was pointing at is not the slope of the implied vol at a given maturity, but its curvature.single stocks have more curvature than index. that ...

because most of the time, in equity, when the spot goes down the vols goes up.your second question makes no sense to me, but i am very dumb, so maybe somebody else can comment on that

<t>QuoteOriginally posted by: Money1) What does abbrevation, such as, IMHO, IDB .. etc. stand for ?IDB: inter dealer broker. it is the OTC market between professionalsIMHO: in my humble opinionQuote2) In this case, how should I get the correct correlation figure to use (in the latter case of +50 poi...

depends on the markets. never seen it positive in equity. I would expect it positive in commodities, and zeroish in forex.and what do you mean it is not in percentages??? is it not between -1 and 1?

yes of course.if you are lloking for numbers: volvol between 10% and 300% maybe more. correlation between 0 and -90%. reversion time from a month to a couple of years. IMHO of course

<t>Money,re: the task your boss has set you. If I understand correctly, they want to understand from the PL whether the correlation paramenter being used is right.As Paul said, there might be many effects of larger order of magnitude that are obfuscating the correlation impact on the PL, one of them...

<r>QuoteOriginally posted by: FermionQuoteOriginally posted by: FermionWhat does "delta" mean when you have multiple underlyings? A vector of deltas for each underlying? Or a single delta for some sort of "Market" value? Or what?Likewise "implied vol".I tried to follow this thread, but find I cannot...

<t>achilles,my 0.02$. You are putting the finger in the sore of current derivatives practice (I talk only about equity, mind you). Though many of the traders/practitioners are aware of the issues you mention, in my limited experience I know of no major house where pricing, trading hedging and risk m...

QuoteOriginally posted by: Si...Now if you keep hustling me pea brain I will report you.....LOL ! this is fun! I am sure you must be faking it, you're just too good to be true otherwise.oh and please report me! I have not been banned yet and kind of feeling excluded.

<t>Si: I'm probably old enough to be your father... and have probably traded more markets than you have heard of. I suggest you start by reading Natemberg... and if you have read it, then try to understand it, maybe by talking with a decent quant."calls trade at premium to puts". that statement mean...