Is there a good book can recommend on credit default swap options and portfolio products options?

Prop trader!

That begs the question - what is the skill needed to be a trader?

<t>Given the way the market has repriced in standard maturities, I am skeptical of a particular approach being classified as the way for pricing standard tranches. For example, Lehman Strategy guys had written in May last year about the mispricing of mezzanine tranches (how 10y was too tight when co...

The answer is the price is > than 100-(8.25-6)*8 or greater than 82.

HiI am trying to price a range accrual notes where the coupon is 1 for the day 5 yr CMS rate > 2 yr CMS rate.. Can I find alogrithm for such a product anywhere? What will be the hedging instruments i will need to use? cheers

What do you want to know about the basis? The paper just has a very qualitative discussion.

<t>I've seen that thread. The problem with the base correlation is that it's just trying to fit market observed prices to a model. It doesn't tell me anything about:- Given a base correlation curve (or skew) for a given structure for given maturity, how can I extrapolate to other structures/ maturit...

What are inherent problems with pricing tranches in an option framework?

Thanks prettyspecific. I realize that I wasn't really specific in my question.I want to do this for ATM options. If you have an ATM call, it's price should be close to PV of E(dS), right?

<t>Thanks Aaron. Main motivation to my question is for processes where there is not enough data for observed volatility (or there is no intutive sense for it). Now, if you know prices for various 3M month maturity options and 6M maturity options and want to see relative value (mispricing), what kind...

I agree. However, risk neutraility would mean that if you take spot price to be equal to current spot + 3 month option price. My concern is if I am ignoring the convex profile of option by doing this.

Well that's fair. However, how can we compare base correlation across time or spread? What's the intutive reasoning?