<t>Hi all,I'm bringing this topic up to life again. This is the topic closest from my questioning. I'm currently trying to get the implied volatility of a vanilla Euro floor with maturity 1Y with data from bloom. I have the price ( which is not supposed to take into account the first floorlet which ...

<t>I would assume the following but would like to have a confirmation :- at each step of the root search I have a new sigma_s (vol from the smile strangle)- I deduce the sigma_25P from eq. 32 on p18- I find K_25P since I now have sigma_25P and the delta (unique solution since this is a put)- I use t...

<t>Hello,I'm trying to understand the calibration procedure given in FX Volatility Smile Construction by Wystup but have an issue with the premium-adjusted delta case.In his theorem 1 (p20-21) it refers to a variable a, used in eq 35 : "variable a is the difference of a call delta, corresponding to ...

Great, you are right and now it works ! I should have tried to do the maths at first. Many thanks !

<t>QuoteOriginally posted by: lpQuoteOriginally posted by: AlanPaulot (O(T)) 174.47I can confirm that I find 174.47 at order 1.Thank you both for your help on this subject. And thanks lp for this nice paper !I still haven't find the bug in my code triggering an error in the function.Actually, I find...

<t>I have lately implemented the Paulot formula but I come across a problem with the set of parameters given previously :atm Fwd = 100%K = 80%T exp = 10ATM vol = 100%Beta = 30%alpha = 100%rho = 90%-> for these parameters in the first-order correction in Paulot, I got an error in the tanh-1 (ArcTanh)...

Considering for instance a in the money call option on a stock whose forward is negative and volatility very low (let's say 0), it makes sense that the asian is more expensive than its european equivalent.

amit7ul : Ur result is the same daveangel had, it's just a problem of notation : we indeed have dy=d(lnU) and you were so comparing the "drift term" of d(lnU) to the "drift term" of dU/U.In analogy with Black-Scholes notation, the drift refers rather to the "drift term" of dU/U.

Hint : After adjusting your portfolio for the gamma, you're no longer delta neutral...

<t>QuoteOriginally posted by: DavidFwith the correlations being estimated for example form historical data.Which is the usual way of estimating correlation for pricing exotic option on baskets : is it a pure historical correlation and if yes, which observation window and which frequency ? Or is it s...

I would say since we expect the price of the underlying following the risk-free rate in the future, the expected return of a put will decrease whereas the expected return of a call will stay unchanged.