In that case you would have to include the cost of carry. But who would hedge Z options with H futures?

<t>QuoteOriginally posted by: daveangelQuoteOriginally posted by: MikeNNTo reply to 2fingers, it really depends on the construction of the index, but I would think not. In the no-arb world, the hard to borrow friction should be priced into the future.Are you saying that you should not adjust the for...

To reply to 2fingers, it really depends on the construction of the index, but I would think not. In the no-arb world, the hard to borrow friction should be priced into the future.

Thanks for all the advice, I'll check it out and report back.

What is the best approach to model kurtosis in a binomial options model?

There is one. Bloomberg predicts it would be $0.64. If you are not allowed to exercise. The stock will drop by the div amount. In the exercise early case, the forward is the pre-div price which is 120.25.

<t>Let's say SPY Dec 18 118 Strike. Right now, the C is 3.26/30 and the P is 1.29/32 vs. 120.25 which the means of the market implies a forward price of 119.97. Clearly this doesn't completely account for the non-exercise case, which would have a forward price of 120.25 - expected dividend = ~119.61...

I understand that, but I want to quantify that "non-zero." When I looked at SPY options last, the implied stock price is a gradual drop off, not a binary exercise or not exercise. That gradualness is what I want to quantify.

<t>I was trying to price SPY options and found that the implied stock price from out of the money options differ from deep in the money options. I understand that this is because of early exercise option for the dividend for deep in the money options. My question is, what is the mathematically corre...

I recall that Black Scholes equation distinguishes a long rate and a carry rate, however, I think most people assume that they are equal and cancel each other out. Does anyone recall the expanded version of B-S which distinguishes the 2 rates?

Has anyone taken a look at comparing leveraged ETF compared with their non-leveraged counterpart? Does anyone know if there is a good way to compare the two on the long run (beyond their daily re-leveraging)? Any thoughts and insights appreciated.

Real quick bloomberg question or maybe I can find this somewhere else. How do I get historical basis point vol on bloomberg on various U.S. treasuries? Thanks in advance.

Does anyone know what the order of execution for bonds and notes options are on CBOT are? Is it first in first out? Is it a % of total on that price like in ZQ? Or is it a more complex equation like in Eurodollars?thanks in advance

<t>I would think that if they paid the same salary (which they should) then yes, I would work for a nationalized bank. Unfortunately there is blood in the air and chances are they are going to create a irrational $400k cap on all salary (the amount the president makes). I think Barney Frank tried to...

<t>Are you asking if that expiration month cushion between futures and options pricing matters? If that's the question, I'm for sure it would be. But 'how' is a very difficult question that is beyond my understanding. I don't think I can do justice of explaining the details of the delivery month as ...