Recently I read a paper (attached) that introduces a technique of using a mixed interpolation method that merges two different kind of interpolation (linear and some high degree spline form) to bootstrap a cero curve. The main argument is: " since instruments granularity decreases in the mid-lo...

<t>I am building a volatility surface for bond options (colombian local debt market) but I really dont know what is the standard way of presenting the surface in the bond space (OTC trading)Does it work like in FX that you have a sort of Delta surface....10Delta Call 25D Call ATM 25D Put 10D Put ??D...

<t>Which is a more liquid refference to build a curve ???The USD Swap with the fixed leg being paid semi annual (float is 3M LIBOR) (curve 23 in bloomberg) or the USD swap with the fixed leg being paid Annual (float is 3M LIBOR) (curve 47 in bloomberg). I have always believe that the benhcmark is th...

Can some one explain me in very simple terms what does Make Whole Call means ??I am looking at a bond descrption in bloomberg and it says: Call @ Make-Whole + 75 pbs. I have been searching a clear definition of this but I havent found one yet....Thanks............

<t>The paper stars by considering a forward rate agreement. The formula presented is for the FRA at time 0 is: KL is the fixed rate between dates t0 and t1 and fixing in theta. The rate L(theta) is the LIBOR rate fixing in theta for the period t0-t1. The accrual factor between t0 and t1 is delta and...

<t>Has anyone read the paper by Marc Henrard Called "The Irony in the Derivatives Discounting" ?Its focus on the way simple interest rates derivatives (FRAs and swaps) cashflows should be discounted. There are a couple of questions I have on the paper relating some of the formulas and the concepts p...

<t>Has anyone read the paper of Jarrow and Yildiray on inflation??I have a questionWhen they derive the "Deltas" of the traded securities used to replicate other securities they introduce a term br(t,T) (Hedging Analysis Section). I looked all over the paper and there is no definition of this parame...

Thanks DaveangelFor the boundaries: 2 * Strike = infinity At that point i use linear extrapolation to get the option value.At f = 0 i just discount.THANKS !!

<t>The black PDE for the value of an option on futures is:If I use a discrete version of this PDE to solve the value of an american option using FDM, can i go back to my grid and found the delta simply saying:(V2 - V1)/(F2 - F1) ??Or do i need to include the delta term in the PDE to solve for option...

<t>I have an aproximation to the dice problem that its aproximate to result of doing a MC (0.19..... )If you play infinite times the expected value of sum of four tosses is close to 14. Now you are down to one more toss. To get 17 you can only toss a 3 because if you toss less than that (1 or 2) you...

<t>Since I am always selling futures I am long the CTD option but I am trying to express a view on interes rates. Let me elaborate more on my example. Lets say for example that i have a flat yield curve where all the deliverable bonds are trading at the same yield. lets say that the market is at the...

<t> Given the negative convexity of Bond Futures I can combine a short futures position with a long position in one of the deliverable bonds to create options profiles. If I sell a futures position and buy a long duration deliverable bond i get the profile of long CALL on the Bond, and if I take Sho...

<t>I am using BLACK76 model to price an option on a Bond. I am replacing F in the equation for the Forward bond price (S (everything in clean price terms). What should be the form of the put-call parity equation for this type of options ? and also should i adjust the put call parity for convexity in...

given: which is a GARCH(1,1) equation with: V = Long term variance. once I calibrate this parameters i want to forecast the variance. I am using the following equation and i would like comments on wheahter the equations is right. THANKS !!!!!!!

sorry i was making a mistake. Not simplyfing !!!sorry !!