<t>Indeed. There is slightly subtle point, though, and that is on what the underlying rate is. If by shouting you fix the index at the current rate out of spot, and by not shouting you will eventually fix at some future date's spot rate, your underlyings are two different rates, so there is some val...

It's hard to see how it could reduce the value (to the holder).

Hello, Has anyone written any good papers on this subject, or is this my chance for fame and riches?

<t>I think the formula relating risk-neutral density to the second derivative w.r.t. strike is model-independent, in that it only requires a risk-neutral density to exist, or so.To evaluate the second formula, you need a model to tell you what your gamma is. Suppose you worked this out properly, usi...

You may find it hard to realise whatever number you come up with, since the chances are you will be just delta hedging the position, perhaps with an ATM option hedge, or perhaps not. Your final P&L will likely be determined by what actaully happens, rather than the price of options today.

<t>Hello,I was wondering if anyone had any experience they could share on how to adapt these models to a high vol environment, e.g. JPY. Put aside the debate on log-normal vs. normal for this currency, because we are not always masters of our own work. The most noticeble problem I am seeing is in re...