<t>Did anyone read the above captioned paper by Reiswich and Wystup?I like it. However, I could not reproduce the numerical result. Base on the data from table 4 in the paper, the USDJPY forward price is 90.686. Since USDJPY is premium adjusted, Atm strike is 90.516 using the formula f exp(-0.5 sigm...

<t>Kukloma1Your stated answer is not correct. We can simply use replication.a S + b = X, where a is the number stock share, b is the cash amount and X is the barrier option.By matching boundary condition at S=0 and S=150, we have a = 1/150 and b = 0which is independent of interest rate.You can also ...

Rickynu,thank you very much for your answer.Yes, when we roll 1 month ED futures, there are liquidity and credit issues. At first sign, 20bps seems too large.

<t>There is a large spread between 1M and 3M ED futures, roughly 20 bps. For example, from Bloomberg, on Jun 29, 2009.The quote for 3M ED futures Sep contract is 99.36 (0.664%). The quotes for 1M ED futures Sep, Oct and Nov contracts are 99.5875 (0.4125%), 99.5225 (0.4775%) and 99.465(0.535%).Since ...

<t>Hello Martinghoul,Thank you very much for spending time answer my question. I agree that it depends on practicality. Is it fair to say it depends on which convention is used for bootstrapinng the interest rate curve? In other words, pricing and curve bootstrapping must use the same convention so ...

It depends on what you mean by closed form solution. In this linear system of SDE, X_{1,2} can be expressed in terms of integrals.

<t>Sorry if my question is not clear. Let me be more specify. Suppose you have a 1 year "vanilla" interest rate swap with quarter floating rate payment. i.e., the floating rate index is a 3 months libor. However, I have seen two ways of computing the forward libor. I was not sure which one is correc...

<t>say the floating leg of the vanilla interest rate swap pays quarterly. Is the pay index the 3 month libor or the forward rate implied from the accrual period? Without the holiday adjustment, the libor and forward rate are of the same tenor. However, the tenor of the forward rate implied from the ...