<t>Hi,I have the following question. I am managing a book of options written on an interest rate fund (that is a fund that includes short term government bonds and other bonds which are sensitive to short term interest rates). Suppose that I know the duration of such fund. Suppose that I have a delt...

<t>Hi everybody,I am an equity derivatives trader but next week I am starting managing a book of options on funds. Can anyone please suggest me as many books or papers as possible where I can learn more about pricing and hedging options on funds? Of course I need something with a very practical appr...

<t>Hi,I have the following question:Suppose we have a stock (for example Siemens) which pays a dividend of 1.35% on 27 Jan 2006. Let's suppose the price of one stock is € 63.35 and the weight of the stock on the index is 3.12%. The question is: how can I transform such dividend (1.35%) in index poin...

Thank you erstwhile. The hedging simulation is much clearer now.Regards.

<t>Hi erstwhile,Thank you very much for your reply.I agree with you about the volatility problem.Now, let's suppose that I have bought a call written on MDAX. In order to hedge my position I should sell DAX. Could you please give me more informations about the hedging simulation with an assumed DAX-...

<t>Hi everybody,I have an OTC option written on MDAX. Given that there aren't listed option prices on MDAX how can I calculate the implied volatilities of options written on such index? An idea might be to look at the implied volatilities of options written on the DAX but I think I should modify the...

<t>Hi everybody,I am trying to implement the HW paper for the valuation of CDS. I calculated the probabilities of default and they are slightly different from those illustrated in Table 2. Maybe I made a mistake when I calculated the prices of the Bonds at time 0 or when I wrote the function for cal...

Nobody knows how to calculate bid and ask of Butterflies?Message for FDAXJihad,Your mom performs wonderfully in the links you sent me. Congratulations! She is very talented!

<t>Butterflies can be obtained using this formula:BF 25D (Mid-price) = (25 D Call (Mid-price) + 25 D Put (Mid-price))/2 - ATM (Mid-price)The formula which allows to calculate the smile curve starting from Risk Reversals, Butterflies and ATM is:25 D Call (Mid-price) = (RR 25 D (Mid-price))/2 + BF 25 ...

<t>Thanks Anthony for replying once again.Butterflies can be obtained using this formula:BF 25D (Mid-price) = (25 D Call (Mid-price) + 25 D Put (Mid-price))/2 - ATM (Mid-price)I have also found the formula which allows to calculate the smile curve starting from Risk Reversals, Butterflies and ATM:25...

<t>Thanks again for replying. I have one last question about this topic:1) How can I calculate the smile curve starting from the Risk Reversals quotes and ATM volatility?Example:RR 25 D 2 Months Eur-Usd: 0.03/0.27 CATM 2 Months Eur-Usd: 10.59/10.80How can I calculate 25 D Eur Call 2 Months (Bid/Ask)...

Thanks for replying. It helps very much, though I have two more questions:1) you wrote 25D Risk Reversal Bid the dealer buys Eur Put and sells Eur Call. Shouldn't it be the opposite?2) why do the 25D Risk Reversal Bid and Offer are calculated using the Mid Eur Call 25D?Thanks for helping.

<t>Hi everybody,I have some questions regarding Risk Reversals.Suppose you have 25 Delta Risk Reversals 1 month EUR-USD -0.09 / 0.19 PMy questions are:1) What do these numbers mean?2) How can I obtain them from the smile? 3) On the Bid Risk Reversals am I available to buy Risk Reversals (that is Buy...