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by vxs
August 25th, 2011, 7:57 pm
Forum: Technical Forum
Topic: Yield based pricing of 100 (and above) strike IR options
Replies: 1
Views: 18788

Yield based pricing of 100 (and above) strike IR options

I am currently using 99.9999 as the strike in yield based method, but am curious about what would be an approach for the strikes above 100.
by vxs
August 25th, 2011, 7:33 pm
Forum: Technical Forum
Topic: Yield based pricing of 100 (and above) strike IR options
Replies: 1
Views: 18788

Yield based pricing of 100 (and above) strike IR options

<t>Hi All,Given the current rates environment, I see some trades on the 100 strike Eurodollar and Euribor options. There are strikes above a 100 but no volumes on CME that I saw at a quick glance.Pricing these using the price based method gives really crappy risk results, especially when combined a ...
by vxs
August 25th, 2011, 7:05 pm
Forum: Technical Forum
Topic: Effectiveness of hedging corp credit using CDX
Replies: 4
Views: 20433

Effectiveness of hedging corp credit using CDX

Thanks!
by vxs
August 19th, 2011, 2:55 pm
Forum: Technical Forum
Topic: Effectiveness of hedging corp credit using CDX
Replies: 4
Views: 20433

Effectiveness of hedging corp credit using CDX

<t>Well, my reason is model validation But in general, it could be a portfolio of covertibles, and you are betting on vega and want to hedge out IR and credit risk (convert arb).You could also hedge out systematic credit spread risk and bet on spread directionality relative to the market for particu...
by vxs
August 18th, 2011, 6:55 pm
Forum: Technical Forum
Topic: Effectiveness of hedging corp credit using CDX
Replies: 4
Views: 20433

Effectiveness of hedging corp credit using CDX

<t>Hello,If I have a moderate sized portfolio of corporate bonds - let's say about 50 different fairly liquid issuers most of them IG with only a couple of HY. I am then hedging out most of the IR risk using treasuries. What would be the standard way that credit spread risk is hedged out in the abov...
by vxs
May 20th, 2010, 1:34 pm
Forum: Brainteaser Forum
Topic: Multivariate Gaussians questions
Replies: 7
Views: 40018

Multivariate Gaussians questions

<t>Quotec) Prove that if X and Y are jointly Gaussian and Cov(X,Y)=0 then X and Y are independentThis can be seen immediately by looking at the form of the pdf of a multivariate normal. Is there another way?Is this a sufficient answer??Cov(X,Y) = E[XY] - E[X]E[Y] = 0 Therefore E[XY] = E[X] E[Y] mean...
by vxs
February 18th, 2009, 5:28 am
Forum: Technical Forum
Topic: Option valuation on ultra short ETF (e.g. ticker = SKF)
Replies: 8
Views: 50668

Option valuation on ultra short ETF (e.g. ticker = SKF)

<t>No, the drift of any tradeable asset is always r.Consider a call... we want to price the payoff Where K' is S_0 - K/2Therefore, call on this payoff is twice the price of the Black-Scholes put with the modified strike. Of course this is wrong in the context of the problem given as it is an ETF, an...
by vxs
December 14th, 2008, 8:15 pm
Forum: Brainteaser Forum
Topic: Anyone know how to solve this question?
Replies: 10
Views: 48418

Anyone know how to solve this question?

WileyswI had a question... pardon my ignorance... why do you multiply by 2, wouldn't the integrals take care of it the "both sides" aspect of it. My confusion arises from the fact that I am getting 0.125 (1/8) by MC as well.Thanks
by vxs
December 14th, 2008, 7:36 pm
Forum: Brainteaser Forum
Topic: Who Gets The Prize?
Replies: 25
Views: 52474

Who Gets The Prize?

Distribution:11111222235561010101011121313141414151515171717171818191919202021212325252525262627282828282933333436363638384242434750505563646772100
by vxs
December 14th, 2008, 1:50 am
Forum: Brainteaser Forum
Topic: Who Gets The Prize?
Replies: 25
Views: 52474

Who Gets The Prize?

<t>This was a contest conducted by my options pricing prof in my fin math program. Apparently it is actually a very famous problem and is more "behavioral" than quant. I think this was a part of a Financial Times competition, which found many people guessing the least answer( 1 or 0), a few people g...
by vxs
December 14th, 2008, 1:01 am
Forum: Brainteaser Forum
Topic: Fridays 13
Replies: 7
Views: 46980

Fridays 13

<t>This is what MCarreira has coded I guess... don't know if what I've written classifies as "elegant" Obviously the differences in the 13ths of each month has to be a factor of 7. Now we see that 63 and 91 are factors of 7. For 63, this means the sum of days in 2 months needs to be 63, which is not...