QuoteOriginally posted by: PaulThe Vs are functions of time.PVi(T)=Va(T) = intrinsic value at expiryPaolo

<t>CplMkts1as daveangel and DavidJN pointed out a par swap has by definition a Zero NPV.This means for example that the PV of a semiannual payment of 3.75% for 10Y (the fixed leg) is financially equivalent to the PV of a quarterly payment of the 3M LIBOR (the floating leg)Only the first LIBOR Rate i...

<t>QuoteOriginally posted by: DavidJNAnd while we're at it, the numerator of Paolo's equation should be the present value of the fixed side of the swap per dollar notional, not the NPV of the whole swap.Hi DavidJMy equation comes from the equality:PV_FixedLeg$= PV_FloatingLeg$ + Spread*alpha$where P...

<t>Hi CplMkts14. Get the NPV of the Swap (assuming a zero spread floating leg)5. The spread iswhere the summatory is over all the (future) payments of the floating legN(i) is the notional of the i-th floatletDF(i) is the discount factort(i) is the number of days in a year according to the daycount c...

<t>p^2-1=(p+1)*(p-1)The terms on the right side are 2 consecutive even numbers. So one is a multiple of 2 and the other is a multiple of 4. Moreover one of them is also a multiple of 3. (one of 3 consecutive numbers is a multiple of 3 and "p" is prime by definition). So (p^2-1) is a multiple of 2*3*...

<t>QuoteOriginally posted by: arupbI think , the normal distribution takes a sum of risk free interest rate and vol^2Henced1 = NormSDist((Log(frw / strike) + (0.5 * Vol^ 2) * T) / (Vol* T^ 0.5))should bed1 = NormSDist((Log(frw / strike) + (rate + 0.5 * Vol^ 2) * T) / (Vol* T^ 0.5))The interest rate ...

They 're equivalent:Swaptions can be viewed as bond options with par strike priceRegardsP.

Hi pizza,the definition 1 is correctthe definition 2 should be changed in E*[S(T)/(S(0)*exp(r-d)T)|S(T)>K]see this threadRegardsP.

Isn'it a variation of the Bertrand's paradox?. The solution depends on the definition of randomnessP.

You can imply the strike from the yield curvewhere P(0,*) is the price of a zero coupon bond with expiry *t_0 is the starting date of the underlying swapt_n is the maturity datet_i the payment dates for the fixed legtau_i is the day count convention for the ith coupon of the fixed legP.

already posted

Do you mean the ATM strike of a swaption?P.

<t>If there aren't 110 strike put quoted on the market you can create them synthetically setting up this strategy:Sell 11 put with strike 100, buy 10 call with strike 110, sell 10 shares:You get immediately 11*10 - 10*11.5 +10* 100=995$Investing 995$ at the risk free rate you obtain at maturity 995/...

Yes an arbitrage exists:From put-call parity the value of 110$ strike put is:Selling 11 put with strike 100 and buying 10 put with strike 110 you get 5$The payoff at maturity T is always >=0 P.

<t>QuoteOriginally posted by: gozzi84Why if we consider a not dividend paying stock and taking as numeraire the money market account the ratio is a martingale, but if we consider a stock paying a continuous dividend yield q the ratio wrt the mma is no more a martingale?Yes, but what really matters i...