<t>Hi,I am trying to learn something about the funding adjustment issue and would appreciate some help on the following problem. Consider a non-collateralized plain vanilla swap between a bank A and a corporate B. My question is: how does the bank A mark the value of the swap?I can think that A pric...

What can I do if I only have american options for calibration?Europan option can be computed with analytical formulas for the Heston model, but what can I do when I have only american ones?

-Black model without smile-BGM-Black model with smile-BGM with smile

<t>I agree with Gmike2000: calculating the daily performance and than taking the geometric average over the relevant period seems to be the only reasonable way to do it.This approach gives you a lot of advantages but, as a drawback, you get sometimes some counter-intuitive results.Example:- you inve...

<t>Maybe I did not understand well, but how can you forget about correlations?If you have two contracts in a portfolio with market value MV1 and MV2 and volatilities VOL1 and VOL2 (% volatilities!) I would say that the volatility (%volatility) of the portfolio is:sqrt( MV1^2 * VOL1^2 + MV2^2 * VOL2^...

<t>Yes, but I think that Incorporating the 3M vs 6M basis is like having two curves, one for 3M and the other for 6M.Indeed, to calibrate the basis before t = 1 Y (where you do not have market data) you just define it to be compatible with the 2 curves obatained from the available sets of market dat...

<t>I'm trying to price with the same curve two kind of IRS:- fixed rate vs. EURIBOR6M- fixed rate vs. EURIBOR3Mbut I'm facing a problem. The fixing of the EURIBOR3M gives me the effective zero rate of my curve for maturity 3M. The fixing of the EURIBOR6M gives me the effective zero rate of my curve ...

So the first fixing matters but somebody thinks it is not a big effect (from his point of view).Maybe that my trader was trying to say the same thing and we had some of those "communication problems"...Thank you all for your time and answers!

Sure, but the floating leg of the swap should pay the rate that fixes two Bdays before the start date (= it uses today's fixing)

<t>I am confused and looking for some wise suggestion.I just discussed with a trader about how to interpret the real time of IRS quotes and how to use them for building a discount curve.If, today before 11 a.m., I consider an EUR 5Y swap starting spot, EURIBOR6M vs. fixed rate, I can imagine that pe...

<r>In Paul's book "Paul Wilmott derivatives The theory and practice of financial engineering", chapter 45, first page, Paul talks about riskmetrics and says "Some of the service is free, the data sets are available at <URL url="http://www.reuters.com">www.reuters.com</URL> (or follow the links from ...

<t>hi all,I 'm facing the optimization problem of heston.I'm analyzing the sim annealing functions in the gsl_library to see if I can work an optimizer out of them (local or global) .Has anybody used them for a similar purpose?And what is the parameter 'ITERS_FIXED_T' for?All the changes of this par...

have you made your implementation in c++?what about the gsl-functions in 'gsl_siman.h' file for performing the simulated annealing?Did you have a look?I'm trying to understand if a global optimizer can be made starting from this function.

<t>lapsi,I am calibrating too,I've posted a message in 'Heston parameters' topic.Have you already decided if performing a local optimization starting from a guess of the parameters,or a global optimization?And in the first case is the guess used in such cases standard, i.e. which guess are you going...

<t>alan,does the particular set of initial parameters you suggested herefor the heston model depend in some way from the option wondering was going to price or is it reasonable for every kind of option?And do you think a local calibration ,i.e. a calibration starting from a guess of the parameters,i...