Wow, four different answers with only sheep economy. What happen if we add milk production/consumption in this economy? Will adding cheese make the entire problem cursed with too many dimensions and render it impossible to solve?

OAS = Z spread (if no options in the bond)

Whenever you see option with strike of zero or close to zero, it is probably somehow related to loopholes avoiding/delaying taxes or some regulatory requirements. Why else have such thing, as you have same economic value (less counterparty risk) as the vanilla.

<t>QuoteOriginally posted by: Traden4AlphaReal Price of Gold (in 1998 $) (not sure how accurate this is, but it's interesting) -- EDIT: different image link that works, I hope --Well there you go 627$ average over ~300 years. 627$ as of 1998 translates to 825$ as of today. It seems that the most sta...

<t>QuoteOriginally posted by: willsmithMarkov chains / regimes are often useful in volatility modelling, volatility sits happily in a quiet regime and boom, suddenly it switches to a noisy regime. Then after a while, back again. For example, electricity spot price modelling often uses this.I guess i...

Similar topic Basicly, since gold is only inflation hedge and used for the same things as before, I think 30+ years of inflation adjusted gold prices should reveal resonable future gold price distribution. And, the data is showing that gold may be overpriced.

<t>If we look at historical gold prices from 1975, when gold was allowed to trade feely adjusted for inflation we see that it is above its average. If gold is only an inflation hedge, and the long term supply / demand is not changed, and you think 30+ years is enough to capture whatever true equilib...

<t>QuoteOriginally posted by: jawabeanQuoteOriginally posted by: trackstarIf not, you better line up some good works for the fall. i was thinking of lamb-kebab party in my backyard. i guess the lamb vote is also lost for me. i should have a good support from pigs population though, and there's more ...

just a thought, not sure if this is actually done:Get the price of the risk-free zero coupon bond with same maturity and same face value.The difference between this and price of the risky bond should match PV of IRS and that gives you the ASW.

for bonds whithout options: asset swap spread - this should be the same as CDS in theory if you can get funding at Libor.for callable/puttable bonds : option adjusted spread as a best proxy.

<t>QuoteOriginally posted by: taneururerI'm a bit late to this, but are you discussing the right terminal value? In other words, for pricing stocks one could use DCF which requires an estimate of a terminal value. One might use the standard formula of:(CF(t-1) * (1 + g)) / (Discount Rate - g)Also, i...

<t>Expected terminal value is the current price adjusted for dividends only under risk neutral measure, which is made up measure that is convenient for pricing (i.e. prevent arbitrage, under some assumptions like complete market). The simplest example is a pv of a forward on a stock must be the same...

<t>Somehow, me still thinks if we get to scenario that owning a farmland is one of the few ways of surviving, allocating few percents of portfolio to account for that disaster in gold, small arms and few years supply in food cans should get you covered…Seriously, it seems way safer play to do cointe...

<t>I agree that gold practically have no floor and ceiling and solely determined by supply and demand, but:1) The performance study probably has a survival bias. We know US was a success story in the 20th century. Therefore it is not a surprise the good equity returns. That's like looking at a compa...

Also, think about it, the only meaningfull CDS on sovereign name, is a quanto CDS - i.e. if you are betting on Argentina defaulting, you don't want your payoff in local currency - cause is probably worhless.