How to price options on stock of company which is under takeover. Say we want to price option on stock A. Value of A depends on value of B and should be in range [10,30].thanks a lot.

<t>assuming that i know forward vol term structure, say vol(0-30days), vol (30-60days), vol(60-90) day....1 month forwad vols...On trinom i choose dt=15 days, how should i adjust my vols?vol(50-65)=sqrt(var(50-60)*10/365+var(60-65)*5/365)/15 orvol(50-65)=sqrt( var(50-60)*10/365+var(60-65)*5/365 +2*c...

<t>Dear experts,i am urgently looking for your help. I don’t undestand why in case the same chepest-to-delivery bond, a net basis for 2yr december bond futures (schatz) is .90, but for march is only .40. I would expect them to be approximately the same or march basis slightly higher because of more ...

i asked Bloomberg, they gave me stupid answer... min tarded peace is 1 cent!!!!!!! i don't believe...

What is a face value of government bonds. For example, for ISINE0001135176 i can see min piece 0.01, par 0.01, principal 1M. I am confused. thanks

<t>excuse my another silly question, how to incorporate time varying volatilities to HW tree?I am reading Schonbucher article "A tree inplementation of a credit spread model for credit derivatives" where he said that jmax >=0.184/(a*dt) is only true when vol is constant. And in case of time dependen...

<t>I am using one factor HW (vol is time dependent) to price callable/putable bonds. I am confuse how to choose a level of mean reversion.If i don't want to use historical data, i guess the only way to get a mean reversion level to calibrate to some interest rate derivatives, for example swaption......

but if we fix state space and change dt, will we still get positive probabilities? thanks

what is the second way to do it anyway?thanks

Thanks a lot for your answer, but unfortunately i can not change state space, my tree constror is not very flexible Can you tell me more about second option? thanks

can some one give me advise how to solve it, please......

<t>I am trying to price callable bond with Hull trinomial tree. But the results i am getting are very dependent of choice of mean-reversion level. For testing purpose, i am using the same example as in Hull book, page 562: 10yr bond, flat 5% yirld curve, sigma=20%, 5%coupon semian., 1.5 yr call opti...

Can someone help me with bond futures duration calculation? I can calculate duration of the cheapest to delivery bond, but does futures duration is the same? can i assume that duration of futures is CTD duration / conversion factor?thanks

<t>is it possible that gross basis spread between bonds and bond futures is smaller then net basis spread? I tested for RXU5 Comdty (Bloomberg) for third CTD bond and my result is different from what Bloomberg shows. Can someone verify my calculations:ED936651 Corpclean price=99.677repo rate=2.11%co...

why in the calculation of the fair future price, we don’t take the future value of the accrued interest?