That's what I thought. Then what about rates carry? I don't think I should expect any carry for a instrument with optionality or forward starting since simply there is no accrual. Is that right?

<t>Thanks, interesting article. However, my question is probably even more basic than Vol carry and roll down. I am wondering if I should expect any rate carry and roll-down for a instrument with optionality. The answer might be "yes". Then how should I calculate rates carry and roll-down for a swap...

<t>Anyone can give me some ideas about how to define and calculate carry and roll-down return for swaptions? I am doing return attribution for a swaption portfolio. I am trying to use 0.5*convexity*vol^2*DeltaT to approximate the theta return. I doubt this approximation actually includes carry and r...

Anyone has good idea about how to evaluate correlations between emerging market equityes which only have very short history? Thanks

<t>Hi, I am trying to calculate theta return of the optionality embedded in some MBS instruments and callable debt. Our existing model calculates Theta return as ( ZV spread - OAS )*Time unit. I don't feel comfortable with this approach, however, can't say anything terribly wrong. Is this industry s...

<t>I am trying to attribute a part of total return of a mortgage portfolio to Theta return. I am using convexity to apprximate theta, -(1/2)*Gamma*Vol(Implied)^2 * deltaT? . However, I am wondering if I consider the difference between the realized volatility and the implied volatility, shall I modif...

Anyone has idea which instrument I should choose to hedge some mortgage bonds, for example 30 yr MBS, if I have 10 yr swaps and 10 yr Treasury futures? What's the pros and cons and how can I quantify these pros and cons? Thanks!

Thank you so much everybody. I am working on programming this.

<t>Thank you so much for detailed explanation. I need take a while to digest it. My goal is to calibrate a set of G2++ parameter on the daily basis to the individual CMS spread curve, for example in X to 5 or in X to 10 Vs. 3M libor. It would be better If I could calibrate these curves simultaneousl...

<t>I collected some info from Brigo/Mercurio book and come up the calibration procedure below:1. get a a set of initial G2++ parameter2. calculate Expected forward rate using formula f(t,T)=f(0,T)-0.5*{V(T-t)-V(T)}+exp(-a(T-t))x(t)+exp(-b(T-t))y(t)3. apply a appropriate convexity adjustment, which I...

Thanks for reply. I am sure I don't have an option. Do you mean Brigo/Mercurio's "Interest rate models: theory and paractice"?

<t>I was asked to calibrate G2++ model to CMS spreads, say 10Y swap rate exchange for 3M libor. I have read many threads in Wilmott about CMS and still have no idea how to do it. Is there any close-form solution in order to avoid monte carlo simulation plus optimization. Anyone could give me some ad...

Thanks a lot. I think this is what I need.

It seems to me the implied financing rate is the implied rate which can make put-call parity valid based on the market observed put call prices. I need to know exact definition.

Anyone can tell me what is implied financing of futures and how to calculate it? Thanks.