as for the crude you should be aware that the 1m risk reversal is centered around the futures contract, not the spot...hence the contango expecation is already embedded in the atm (which is then an atm forward)

<t>Something it's still missing in your arbitrage: your net position is Short october bfoe (but notice it's the average of Platts assessments) and Long october bfoe (which is a "paper" cargo).So at some time in August you will have to sell your october Bfoe in order not to get nominated for delivery...

Hi, first of all I have a doubt (sorry to answer with a question): can u trade EFPs? They involve taking a physical position on crude, while i guess your arbitrage is meant to be paper only...

<t>It looks like your case is that of a new line of business in the bank, ie there's no past track-record (it would otherwise be easy to set a budget).Given the premise, if I were your boss I would use a cost-based approach. I would hence expect from you to cover, at least, the cost associated to yo...

QuoteOriginally posted by: frenchXDo you think that another oil bubble is growing (like the one in summer 2008)? Who said the summer 2008 was a bubble?

<t>QuoteOriginally posted by: rmaxQuoteOriginally posted by: OrbitQuoteOriginally posted by: rmaxThis is the same for LME. However in the LME your 1 ton of Copper might be in a Warehouse in Shanghai and your Copper Mill might be in South America....I traded allie for a little while. This was some ti...

<t>QuoteOriginally posted by: arsunHello Guys:Has anyone been successful in pricing Asian style options on IPE Brent Firs/front line swaps/ WTI first line swaps. The reason why I am asking this is I would like to know what implied volatility goes into the model say Curran/ I have implied volatility ...

<t>QuoteOriginally posted by: yetanotherquantThanks. Does look like the heatingoil stockpiles have increased a lot, and might explain the lower crack spread vols. Being new to this, I guess it's a bit of a surprise to me that crack spread vols are really driven so much by fundamentals - how do peopl...

<t>It's a strange question to me, I never think to delta like this in commodities: yetanotherquant you are perhaps from equities?What i can simply observe is that the crack spread itself has not a zero delta:- the delta is <> zero in terms of lots: brent-gasoil crack is 3 lots brent and 4 lots gasoi...

<t>Hello,when you're up to price asian options on commodities you're expected to be first able to price efficiently the swaps: that's because the shape of the fwd curve is the most important input. Once you can price efficiently swaps you can also hedge them efficiently with futures.So the choice im...

Hi James, on the physicalmarket these contracts are quite common (I saw dozens of them): you will hardly find anything around because it's something of little interest for academics (but as often happens of big interests for traders).What are your doubts about?

I think you are pretty misleaden: in commodities we use Black76 for option on futures. The model is on the forward itself, not the spot+yeld...contango or backwardation has no impact.Besides the forward has no drift by definition.

The GSCI spot is an index not replicable: during the roll period it just take the new futures price without considering the amount of money you invested. The gsci ER is instead the index you can replicate investing on futures.

<t>QuoteOriginally posted by: HTFBHow exactly do ETF managers extract their fees? If I am short an ETF, do I get paid the fee? Sorry if these are beginner questions... I trade ETFs for my personal account, but I guess I don't fully understand them!That's correct: basically you can gain the managemen...

<t>In theory Brent should be priced below WTI because the latter reflects a better quality (it's lighter): historically infact the spread was negative.Now the situation in inverted due to physical constraints on Nymex delivery point (Cushing): the point here is that the arbitrage in theory is huge b...