That's a mandatory (convertible bond)You are short 20* the $50 strike and long 10*the $100 strike.In this case the gamma of your short position is higher than the gamma aof your long option position > negative convexity.

<t>I heard that one problem with the bloomberg calculations is the drift.If a stock is going up 1% every day for a year, what's your volatility??? (assuming interest rates and dividends = 0).Per definition the definition the vol is 0%, and that is what bloomberg is calculating I heard (but I never c...

<t>I think a common structure is that you have two different conversion ratios. Up to a certain strike you will get x shares. From the second stike on you will get another conversion ratio Y (in between you have a constant payout)In this case you are long x Zero Strike Calls, and short x Calls with ...

Usually they trade like normal convertibles (mostly as a percentage, sometimes as units). Or do you mean pricing, who is playing etc.?

<t>Hi jeny,I am living close to canary wharf (approx. 15 walking minutes) on the Isle of Dogs. I am paying 195 GBP a week for a nice one bedroom apartment. I think you can pay more and get something with swimming pool, gym. But there should be cheaper flats as well. It depends how much you want to s...

<t>Okay, my point of view is more from the psychology (in fact theoretically there is no difference of gamma long or short).But what function do you want to maximise? I guess the P&L?I really think there a special way to da this. The more vol you can realise (long gamma) the higher is your P&...

<t>I think you are right. You should consider the asset and its vol. For me a position is "too big" when it can hurt you if the market is going in the wrong direction. When you are long gamma it will not hurt you so much as when you are short gamma. Thus somebody could hedge long and short gamma pos...

<t>For equity delta rehedging I heard that there are some empirical studies for intraday, daily and weekly vol. The result was that intraday vol and weekly/montly vol is higher than the daily vol.I myself get a relatively high intraday vol, but you cannot extract it because of transaction costs. And...

Hi akb,you are calculating the daily volatilty in absolute terms. But that's no real optimization.Do you want to know what is the best way to rehedge your Delta (hourly, daily, weekly, after certain moves.....)?

<t>a call option is usually not cheaper than the intrinsic value, but a european call option could.The only reason a american option is never cheaper than the intrinsic value is because you CAN and you WILL exercise it when it is in your favour.But I think that wasn' t the original questions.You sho...

<t>Thanks Aaron and Johnny for your answers,I think there were no examples in the past were this question would have applied for. But it could be in the future (who knows)Looking at the different prospectus of the recent european exchangeable bond issues it is not common anymore to ringfence the sha...

<t>Hello,not really a quant question but I will give it a try:I thought of some default scenarios of exchangeables when the underlying share has still value.First I assume that the underlying shares are not ringfenced:1) Assume parity is 200% (>100%). a) You try to convert before the default happens...

<t>Hi bismarx,I just think the Dividends are the reason why Bloomber is showing a too low Delta (sorry, my fault).You actual Delta makes sense. I still believe in my 60% Delta, but this takes interest rates movements into account.With the positive correlation between interest rates and parity the De...

Hi kulmoedee,Dividends are modeled in the forward of the stock price.It has the same negative effect on the price as the dividend in a call option.

2)sell call: gamma short, delta shortsell put: gamma short, delta longso you have sell puts and sell stock (if you have only the two possibilities)