Hi,Can anyone tell me: if I trade a CDS with a running spread or with an upfront, does this change the payoff in any way or is the payoff on default exactly the same in both cases?thanks in advance,BM

<t>I traded this 1997-1999. I may have some details wrong, so excuse me as it has been a long while.Let contract be a Eurotop future quantoed into USD, the index is demomoinated in EUR. This was the NYMEX contract.Let contract tick-size = 1Let delta = 1Let index level = 3100Let EURUSD = 1.37Now you ...

clever - thxBM

Hi All,A hopefully simple Mathematica question.I have y = f(t) , x = g(t).dy/dx = f' / g'How can I get Mathematica to derive this by itself? RgdsBM

<t>After some thought, I believe the problem lies in the nature of the underlying. The underlying is a default;. but what event happens upon default? For a CDS there isn't just one event - there are two. Firstly upon default, an annuity ceases. Secondly upon default, a payment is made.To explain bet...

But what if a non-defaulting names subsequently defaults? It no longer pays N/125 and so the index and CDS are no longer offsetting for defaults.

<t>Thx StructCred & Zub.In my simple example, I have excluded "market risk" by asserting that spreads are constant. The only stochastic process is the default event as defined by a homogoneous Poisson process (i.e. constant hazard rate). Hence JtD is the only process at work. Yet I am unable to ...

<t>Thx for the post.If we choose the CDS notionals to better replicate the spread payments then we will not be hedged on default.I am supposing that even under simple assumptions (flat hazard rates, zero interest, zero recovery), it is impossible perfectly replicate the index CDS with single name CD...

<t>Can anybody explain this puzzle to me?Suppose we are hedging a call option. The world is a Black-Scholes world (constant vol and IR, no transaction costs, bid=offer, lognormal distribution etc etc); here we can be sure that the delta-hedging strategy on the stock, if done perfectly, will perfectl...

Have a look at:http://www.utexas.edu/courses/lasdon/design3.htmBM

<t>If I understand the question correctly, here is my interpretation:1. I think you have to be careful about combining for a portfolio of options. The no-transction region changes with maturity and in-the-moneyness of the option. I would imagine that one would have to test for being within the trans...

damm it seems that something is being escaped when i type it in. last line should beTee OpenBracket U CloseBracketArghhh

last line should have readT(not T)

Maybe its getting confused because(a) x is both the function and argument for the differientation(b) the function argument is not supplied in D[...]. I.e it expects f[x]TryT[f_] := D[f[x], {x, 1}]u[x_] = Sqrt[2]*xT

<t>Perhaps solve it without integer programming.x/y = -P2/P1Find a rational approximation for P2/P1. The problem is that you can let x and y have arbitrary numbers of digits when P2/P1 is irrational. When do you stop? You will need to specify a precision.In Mathematica, you could use Rationalize[P2/...