<t>The Underlying.Worst Of:This is a big modelling problem in my view. Really big!It is fine in a simple world but there are significant cross greek terms - primarily - d(delta)/d(Vol) which most models do not take into account.In short your cash-future BASIS is highly volatility dependant.This is s...

Complex Payout on a Complex Underlying.Good luck!

<t>It's a Friday, things are quiet and I have time on my hands. Here goes!My point has more to do with 'Trading' than with mathematics/models.If vanilla traders cannot model/predict changes in Spot Implied Distributions with level and time accurately, then what hope have we really got for Forward (C...

<t>I am getting confused, but then I always do.I would like to differentiate between implied volatility and process volatility.As an exotics trader my major interest is in the world of the implied volatilities - i.e. the costs of my vanilla (european) option portfolio and how the market 'suggests' t...

<t>Any primers on reading about StochVol and ImpliedVolatility models.I am returning to the market (equity derivs) after a period away.My view was that the market was not liquid enough to really determine what model/framework really worked.Traders avoided trading this stuff interbank like the plague...

<t>worow is correct - piecewise linear.use a call-strip (infinite) to over/under estimate the payout.forget all this tree stuff, does no-one trade equity? you have to price the skew!!initial=100final=100over estimator:payout=call(k=100)+2call(k=101)+2call(k=102)+2call(k=103).......payout>(x)^2undere...

Treasury Curve defines your 'Forwards'Libor curve defines your payouts.So as FDAX says.Think of it like a pseudo equity quantord = domestic rate (for option payout)rf = foreign rate (treasury yield) defines 'forwards'a bit cack-handed an explanation, I know.

<t>Just discovered this website while trying to find some info on forward volatility.Not wishing to sound glib but there are certain basic problems here.On the fundamental level.I thought some bright Austrian bloke called Kurt proved that all this theory unification thing was a bunch of bunk.Is it n...

Yup just used excel!worow you are right.apologies but my brain just does not work any more.

Strategy - quite complicated I guess.I would use my pocket excel!Can I?

Put_Spread + Call_Spread= Discount_Bond.Why should a strip of PutSpreads be the same price as CallSpreads?Or have I missed something out here?