<r>Thanks MCarreira and Alan.I dont know how would I weight calendar time, but someone messaged me this link from Espen Haug's book and it seems like a good enough solution.<URL url="http://books.google.com/books?id=FU7gam7ZqVsC&lpg=PA165&ots=F3W_NyWw-H&dq=french%20option%20adjusted%20fo...

Is this typically what practitioners also do, use trading days for volatility and theta; and use calendar days for cost of carry or do practitioners do something different. M Carreira thanks, will IM you if I have anymore questions.BestD

<t>Great, thanks for your prompt response. Will try this approach, and hopefully should work well in the practical world. Is this the only theoretically correct way of solving this?So when I calculate Vega I should use Tbus or TCal or use combination of both?Vega = S * exp(q*Tcal) * n?(d1)*sqrt(Tbus...

<t>How would one price European Options using Trading days for Volatility and Theta; and Calendar days for calculating forwards and Cost of carry, Rho. In other words I want a trading day model for Volatility and Theta and use calendar days for cost of carry.In black scholes model, when calculating ...

<t>I?m working on an Electronic arbitrage system that looks for cases at one particular moment, where some security is mispriced relative to some other security (i.e., in violation of the law of one price). The goal of the predictor strategy is to identify price discrepancies that involve a time com...

<t>I use slope of moneyness and curvature of moneyness to construct the smile. I use simple moneyness as in log (K/F) for all maturities, and use moneyness slope and moneyness square (curvature) to fit the vol smile.When I price in my risk reversal across maturities, it gives me different slope numb...

<t>I have been using stock futures feed to price equity options. I take ratio of equity/future. Use that ratio to multiply with the future price to get an implied cash price. Use that implied cash price to price options.Is it possible to use the futures price directly without using implied cash pric...

<t>Right now I am trading options and futures of same expiry. Yeah if I was having this problem with trading different expiry options with different reference month future, then it would be roll, in which case, i would always mark my position as and when i would keep accumulating it. That brings me ...

No worries Papercut, thanks for replying and making me think in another possible solution. Just for my knowledge can u please let me know What are the standard approaches used in market places when it comes to compounding or using simple interest and what are the pros and cons of it.CheersD

<t>In regards to this, i was only speaking of trading index options, european style. I use index futures to hedge, and most of the people use futures to hedge their options. Besides it seems like stock futures are very liquid in these asian countries, and its alot easier and cheaper to trade stock f...

<t>I use to trade in European markets, recently i have moved to the wild east, and am setting up a trading operation in emerging markets like Thailand, Malaysia, India. I will focus on the carry cost and make sure my fowards lines up with ATM combo's.I thought of simple interest because it doesn't s...

<t>Yeah you are probably right, instead of making things more complicated maybe I should just go back to basics and see that the market is using lower volatility for these deep calls relative to the same strike put. I am new at modeling and I thought may be i was doing something wrong with the inter...

<t>Currently I am trading european style index options. I am pricing my options using black scholes. For some reason I always have a tendency to put on Reversals (Buy call, sell put, sell future). Can anyone guide me why do i tend to put this position on even though I am running my interest rates ve...

<t>Identification of curveI have been using a vol curve approach for market making options. I am trading in a market that is fairly illiquid. The reason why I am not using market prices because most of the options don’t have prices and most of the bid ask prices are fairly wide not indicating where ...

Does anyone out here use the wing model on ORC Trader auto trading system for trading options. I just wanted a little more light on on the parameter inputsReference Price, Volatility Reference, Slope Reference, Central skew point, Put curvature and call curvature.Thanks in advanceD