Sure but we don't know what it will cost in 3 months time. The question is what is: E_P( E_Q( max(S(t+0.25) - K,0) | F_{t+0.25}) | F_t) where t is current time, F are filtrations, Q is risk neutral measure, P is physical measure. My shortcut for a back of the envelope approximation to this was to as...

@tibbar,
If you haven't seen it, Risk and Return of Equity Index Collar Strategies looks useful. Just scanning it briefly, the conclusions sounded right to me.

Thanks will take a look

Are we back to Forward Starts then?! No this is an asset management risk management strategy where you want to protect against portfolio losses by buying a 3 month put option that protects against losses above (say) 10%. When the option expires a new 3 month put is purchased to replace the expired ...

It would be a function of the stock price - e.g. 90% of stock price (it would actually be a collar to make the strategy self financing).

What's the underlying?

SPX

The background here is analysing the merits of hedging equity downside risk by rolling either short term options or longer tenors - e.g. comparing expected return and expected costs of a rolling 3 month hedging programme versus simply going for a 1 year tenor hedge. In comparing the price of a 1 yea...

Thanks. My intuition is that the current option price but calculated using the forward volatility implied by the term structure of implied volatility would be a better approximation?

Thanks. This isn't a forward starting option since no premium is paid up front, it is about estimating the premium that is expected when the roll over rate comes for a hedging strategy where 3 month puts are rolled. Paul is correct on the approach. So i can simulate geometric Brownian motion for the...

Hi, If I want to estimate the expected price of a vanilla call or put option with strike K, tenor 3 months, in three months time what's the recommended (practical) approach? If we assume stock price grows at expected rate x%, then a simple approximation might be to put the expected stock price in th...

FPGA

<t>Does anyone know if there is a choice of prior for which MCMC estimation will yield the same parameters as MLE? i.e. the median of the parameter distribution from MCMC being the same as the MLE point estimates.In practice they seem to be pretty close (with Jeffrey's prior), but don't know under w...

<t>Thanks Alan. I was thinking of whether it is feasible to use the Fourier transform pricing approach from your paper on it. Looks like even if I find an expression for the characteristic function, it may be quite slow to evaluate. I'll perhaps come back to this at a later point, as it is an intere...

Ah, well that's good news then - I was under the impression these were coming straight from Wolfram. Agreed on Mathematica - best system for prototyping.

Hi,I'm trying to find the characteristic function for the CEV model - does anyone know where to find it? (tried google quite a bit...)Thanks!

<r>Interesting, but then, have you ever looked at the Mathematica examples like <URL url="http://demonstrations.wolfram.com/OptionPricesInTheVarianceGammaModel/"><LINK_TEXT text="http://demonstrations.wolfram.com/Optio ... ammaModel/">http://demonstrations.wolfram.com/OptionPricesInTheVarianceGammaM...