I guess you can find the implementation on the CD accompanying Carol's Market Risk Analysis (vol 3). You can also see the dependency on the parameter "M".

<t>Just a short update on that. The result stated in the paper seems to be incorrect in that form. One can easily construct a counterexample:Take a futures contract F1 on your favorite commodity and consider F2 a futures contract (same tenor as the first) on a synthetic commodity, whose price is alw...

Hi KnightriderI had the same concerns when reading the proof in the paper. I've already contacted the authors and am awaiting their feedback.I'll let you know once I receive an answer.

<r>Hi everybodyI've seen recently a paper of C.Alexander, where the authors prove that AMERICAN and EUROPEAN spread options on futures must have exactly the same price!<URL url="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1012521This"><LINK_TEXT text="http://papers.ssrn.com/sol3/papers.cfm? ....

<t>I wouldn't change "n" in your concrete example below, i.e. I would taket1 (time to next fixing) = 1/52T (time to expiry) = 25/52m = 1n = 27 (instead of 26)Note however that you need to adjust the initial strike of the option (see Haug p. 196) in order to make the valuation in this case (since ave...

<t>I guess you should take t1 as the time to the NEXT averaging point (--> it's always positive). If averaging hasn't started yet, this will coincide with the FIRST point in the averaging period. When implementing the Curran model, don't forget to make the strike adjustments (see Haug p. 196/197) re...

Yes, "X" would be the Log(commodity price) in the above equation.

What model do you use for the valuation? MC or closed form approximation? Maybe it would be useful to post the parameters you are using for pricing. We could then have a closer look at it.

<t>Hi I'm using OU processes dX=a*(mu-X)dt + sigma*dz for commodity log-price data. I'm calibrating the models based on real daily prices and using both MLE and simple least square regression (which lead to almost identical results). The problem I encounter sometimes is however that the estimated pa...

<t>Well, asian calls can be sometimes more expensive that european calls. One situation is when the you take an underlying, which has a (very) negative cost of carry (occuring e.g. in exotic FX markets or for stocks paying high dividends). Furthermore, once the averaging period for the asian option ...

<t>The LCH model also tries to approximate the sum of lognormals by a lognormal.This is done by matching the first two moments (by adapting the volatility). The notations are a bit complicated in the LCH paper. If the option is BEFORE the averaging start, it seems to me that the above results are co...

<r>Hi,I have the following question on asian options:A lot of options traded in the commodity markets are discrete arithmetic average options. Such options are traded also on the London Metal Exchange, where they are called TAPOs ("Traded average price options").Based on discussions I've had with so...