<t>Good morning all,Quick Question for you:What are the most common ways of estimating historical correlations between a seasonal asset (Natural Gas) and a non-seasonal one (Brent for example)? Is a de-seasonalisation approach like X11 appropriate for Natural Gas? Is it better to perform analysis on...

Strategos,I have just realised that this line X = exp((mu-(sigma^2)/2).*t + sigma * W) is not right.Here you do not diffuse the variable X(t) starting at t = 0 [X(0)=1] on n-1 intervals of length T/n.You draw n-1 times a variable X(t) starting a t = 0 [X(0)=1] and ending at t = T/n.

<t>Spacemonkey,I agree with your upper bound portfolios but we have other possibilities.We can trade any portfolio P composed of Alpha Bonds and Beta Stocks verifying P(K2) = K2 - K1 and 0 <= Alpha <= K2 - K1These constraints give Beta = (1 - (K1 + Alpha)/K2).Your Stock portfolio corresponds to Alph...

<t>Hey all,I have defined a variable x representing the length of the bar on the left-hand side.The length y of the smallest bar is then defined with l the length of the original bar: Finding the expectation of y is fairly straightforward with integrals and I find: What a disappointing results this ...

<t>Yes, P is bounded by 0 and the price of a bond paying 10 currency unit at maturity but this boundary is clearly not really precise.This is true that P tends to 0 (r > 0) when T tends to infinity. It simply means that seen from today, my future payoff is less and less substantial which makes total...

<t>Hey Jokeoh,If I needed to hedge out my sale, I would need to buy (once and not modify) a portfolio replicating the call spread payoff at expiry. Consequently, this solely depends on which type of products are available for trading my underlying asset. Indeed, if the tradable assets at my disposal...

<t>Hi Strategos,Your code produces n-1 time intervals of length T/n. Your time vector is then made of n values ranging from t=0 to t=T*(n-1)/n.Comments:1. Is it normal it does not go to T ?2. To check your re-correlation code, did you replace RNcorr by RNraw to calculate W ? Do you still find the sa...

<t>You are right gc!!The expression of the delta in this binomial framework can simply be found by creating a portfolio containing a long in the Call and Delta shorts on the underlying. This portfolio should be "riskless" in the sense that it has the same value at expiry in all states of the world (...