<t>Thanks - great explanation, I'll give it a bash.It's still an open question as to whether there is a problem with the code in Haug - as far as I can tell it tries to handle ARO's in the fixing period also. Maybe if the Collector is lurking he can confirm or deny?If I come up with anything I'll ke...

<t>Hi,I'm having trouble understanding (or getting to work) Haug's implementation of the Curran approximation of Asian ARO options. (pp197-199, Option Pricing Formulas, 2007).Specifically, what parameters should you pass when you have passed a fixing period (m > 0) ? Continuing Haug's table 4-27 exa...

<t>Does anyone know of a thorough investigation into the Greeks of the different Asian ARO pricing models?I've done a quick search of papers and forums and everything is price focused. I guess I'm looking for hedging with vanilla options and underlying, which model produces best hedge ratios.If noth...

<r>Yes - although I haven't seen a formal proof for the binomial model I have faith in the standard 'for simplicity we assume constant rates but this can easily be extended to the deterministic case' <E>:-P</E> The interpolation is irrelevant (so long as you chose a half-way sensible scheme) since t...

What is THE option pricing formula.The CBOE is packing it in tomorrow, and will settle all options at theoretical value. So which theoretical value should they choose?Lets say American options over stocks that are known to have payed fixed dividends in the past.

<t>Howdy,I'm looking at 'Back to Basics:...' (Huag, Huag, Lewis 2003) in relation to an American put with underlying geometric Brownian process. I'm wondering about the computational cost of this approach.For American puts it seems to me that if you use a tree method the approach you have non-combin...

Ouch.So I'm guessing when '-' is unary it has precedence over '^' but when it is binary the '^' has precedence? Fair enough, and I'll continue to suppose that this follows in VB. I'll stick to C, where there is no confusion about what the '^' operator does

<t>Deferred settlement of both.What you say about the delayed settlement makes sense - and matches Haug's formula.With the delayed payment of the premium, I think that is like asking 'What is the fair amount to pay tomorrow'. So it affects the amount you'd agree to pay, but not really today's fair v...

<t>I re-read my post and realized it doesn't really explain what I'd like to know and looks like I haven't bothered to think for myself, plus I like talking to myself and replying to my own posts:Beginning from the generalized BSM formula (the one with r's and b's):Supposing T2 is the time until we ...

<t>Hi,Has anyone come across this anomaly in Excel 2007?(I tried to attach both a bmp and xlsx file, neither were permitted)A1: -1B1: =-A1^2 (displayed value is 1)A3: 1B3: =-A3^2 (dispalyed value is 1)I checked the help (ha!) for Excel and the above goes against there stated order of operations - I'...

<t>Hi,I'm trying to replicate Haug's BSM formula adjusted for delayed settlement (pg234 2nd ed). The fustrating thing is I can get very close, but not exactly quite, using simple arguments like 'a delay of 3 days in paying the strike is like paying Xe^{-r * 3 days}'. I'm guessing I'm either missing ...

<t>Ditto, although I'm not so concerned about the fitting but the implications of using American over Europeans.Although, I had thought about producing an implied volatility surface and producing a local vol surface from this. The implied surface could be 'guess & check' fitted (the way a trader...