Pat, would you mind also sending me a copy? (address in profile, or gerdUNDERSCOREzeibigATyahooDOTcom) Thank you very much!

For an interesting discussion on quanto adjustments, you can have a look at Peter Jaeckel's recent articel "Quanto Skew": http://www.awdz65.dsl.pipex.com/QuantoSkew.pdf

<t>Hi Samuel,If you know the density, in theory you can very easily numerically compute call or put prices and then back out the implied volatilities.In practice, you however need nice-enough numerical densities.In the context where we tried this approach, the numerical densities were less than suff...

<t>Hi Farshadb,(i) By simply truncating the replication, you will be missing the contribution of the Levy local time at the barrier, between now and maturity.To see that truncation is not sufficient, you can simply take a flat implied volatility surface: Although the fair strike of a range variance ...

<t>You could write down the integrated version of the Ho and Lee SDE:for s >= t, r_s = r_t + sigma (W_s - W_t) + Integral{from t to s} theta_u duYou can plug this into your first g(x,t,T) equation. You'll need to change the order of the integrals for the theta terms.For the Brownian motion, you coul...

You are right samyonez, the 'C' of equation 1.10 is the one that has been introduced in equation (Ansatz) 1.6.

Sorry, your problem doesn't have a solution with deterministic mu:In case 1. you would need mu(t) = S(t), in case 2. mu(t)= ln S(t) : the dt term need to be zero.

<t>QuoteOriginally posted by: pedrogarciaHi!!Thank you for your message. However, I cannot understant how I will replicate the log contract with only one strike ATM, because I cannot create a porftolio of put and calls (I have not slope with only one value..).If you really only have one (ATM) vol av...

<r>There's a gamma swap term sheet on page 144 of Hans Buehler's dissertation:<URL url="http://www.math.tu-berlin.de/~buehler/dl/HansBuehlerDiss.pdf"><LINK_TEXT text="http://www.math.tu-berlin.de/~buehler/d ... erDiss.pdf">http://www.math.tu-berlin.de/~buehler/dl/HansBuehlerDiss.pdf</LINK_TEXT></URL...

Covariance swaps - they work like correlation swaps, but you don't divide by the realized variances.

<t>Sure, approximations are used:If you know all the components' dynamics and the relevant correlations, you need a perfect price and have pleanty of computation time to spare on the basket option, go ahead, do a Monte Carlo and finite differences greeks.In reality, analytic approximations often are...